The real shock to the U.S. electric vehicle market isn’t some new model launch or breakthrough battery chemistry; it’s coming from the used car lot. In 2026, a record wave of EV lease expirations will hit, flooding the market with as many as 330,000 returned vehicles-three times the volume of 2025. That surge in supply, along with the expiration of federal tax credits and automaker pullbacks on production, is setting the stage for a price war that could push sticker prices below those of comparable gasoline cars.
The $7,500 federal EV tax credit, one of the cornerstone incentives driving adoption, expired Sept. 30 and sent U.S. EV sales into a tailspin. In September, EVs captured 12.9% of new car sales as buyers rushed to beat the deadline; by November, that share had shrunk to just 6%. “With EV tax credits expiring, and automakers continuing to prioritize hybrid powertrains, drivers may choose to ditch electrification,” Auto Blog warned. The policy shift has forced Ford, Kia, and General Motors to scale back U.S. EV production, delaying launches and shelving planned models. GM is absorbing a $1.6 billion charge this quarter tied to capacity cuts, contract cancellations, and commercial settlements alone after already taking a $1.1 billion hit from tariffs earlier in the year.
Tariffs are proving more than just a background irritant; they’re reshaping the entire EV supply chain. The Trump administration’s 100% duties on Chinese EVs have provoked retaliatory agricultural sanctions from Beijing, as well as forcing automakers to rethink sourcing strategies. Globally, supplies of battery materials are highly concentrated: China refines 95% of high-purity manganese, and accounts for 70% of the world’s EV output. Tariff barriers on those flows are both inflationary and disrupt the cost advantage that has driven EV affordability in markets like China, where two-thirds of EVs now sell for less than comparable combustion models without subsidies.
For US automakers, the squeeze is double-barreled: margins are being eroded both from higher input costs and from production volumes that remain structurally below pre-pandemic levels, stripping away economies of scale. The EV transition demands massive capital expenditure for lower-margin products-a dynamic already prompting plant closures and job cuts across OEMs and tier suppliers. Logistics networks are being reconfigured to maintain lean inventories-a move that reduces working capital but complicates finished vehicle distribution.
Battery costs – the single largest driver of EV pricing historically-are in flux. Worldwide, average BEV prices fell in 2024 thanks to intense competition and falling cell costs enabled by innovations in chemistries such as LFP and manganese-rich lithium-ion. The gains are exposed to supply shocks in critical minerals, however. Lithium prices fell over 80% from their 2022 peak but demand growth of almost 30% in 2024 points to future deficits from the 2030s. Announced projects meet just 55% of expected demand for high-purity manganese sulfate-a main feedstock for LFP and emerging chemistries-in 2035 under current policy settings.
The geopolitical overlay is impossible to ignore: China’s overcapacity in EV production-explicitly acknowledged by the European Commission and Canada-has become a global export pressure point. With the US market effectively closed to low-cost Chinese brands, those vehicles are being redirected to emerging economies, where they’re accelerating adoption by undercutting local manufacturers. In Europe, meanwhile, tariffs passed with only a slim majority; Beijing is already targeting politically sensitive exports such as French cognac and Spanish pork in retaliation.
To investors and industry analysts, the convergence of these forces-policy withdrawal, trade fragmentation, mineral supply concentration, and a glut of used EVs-represents a tipping point. Price competition will intensify not just in the showroom but in every corner of the upstream supply chain, from nickel mines in Indonesia to battery plants in Michigan. The International Energy Agency still projects EVs will surpass 40% of global car sales by 2030, but in the US, the next two years will test whether market-driven affordability can replace policy-driven adoption. The coming “V Avalanche” will determine whether a surplus of vehicles can overcome a deficit of incentives.
