Electric vehicle sales declined in 2026 even as fuel costs spiked, reflecting a market where demand outstripped supply after federal tax credits ended and automakers scaled back production.
From March to May 2026, hybrid sales were 18% higher than a year earlier. Over the same period, electric vehicle sales were 16% lower than a year before, a result some read as waning interest. Researchers who study car buyers say sales show what was available to purchase, not necessarily what consumers preferred.
When demand exceeds supply, prices rise, which is what happened across parts of the EV market in 2026 as gasoline averaged $4.35 per gallon by late May, up from $2.94 in late February following U.S. and Israeli strikes on Iran on Feb. 28, 2026.
Electric vehicle sales and an industry in retreat
Hybrids and EVs both saw demand jump during the oil shock. Dealers had ample hybrid inventory. EVs were a different story.
Hybrid output had expanded for years, led by Toyota, which accounts for about half of U.S. hybrid sales. Even with brisk demand, hybrid inventories on dealer lots in March 2026 were 19% higher than a year earlier.
EV production had been contracting after a tax and spending law signed in July 2025 ended federal EV tax credits as of Sept. 30, 2025. Prior to the cutoff, buyers could claim up to $7,500 for new EVs and $4,000 for used ones.
Automakers pulled back. General Motors cut more than 3,400 jobs at EV and battery facilities and reassigned its Tennessee plant to energy storage batteries. Ford recorded a $19.5 billion charge tied to its EV unit, halted the all-electric F-150 Lightning, and shifted a Tennessee EV site to produce gas-powered trucks.
Shoppers rushed to buy before credits expired, lifting EVs to 11.3% of new-vehicle sales in September 2025. By November 2025, after the credits ended, EV share fell to 4.3%.
As 2026 unfolded and pump prices climbed, EV demand strengthened. New EV supply shrank from roughly 130 days in the first quarter to 78 days by August, about two days higher than gasoline models.
Dealer discounts narrowed as well. An analysis of online listings from marketcheck.com shows the median new EV listing at 9.8% below sticker in February, 6.6% in April, and 4.7% in June, signaling rising demand rather than excess stock.
A run on used electric vehicles
Before the conflict, used EV prices were slipping after the used EV tax credit lapsed. After the war began, average used EV prices climbed 13% through late June 2026, or about $3,500 for a typical model.
Other indicators matched the trend. Recurrent reported the average price for a used 2023 Chevrolet Bolt rose nearly 20% from January to June 2026.
Used EV inventories tightened too, with roughly 31 days of supply in May, 23% below the prior year.
A costly misreading
The EV market still faces structural hurdles. High purchase prices and concerns about charging access continue to weigh on buyers.
Data does not support the view that 2026 sales lagged because Americans do not want EVs. Sales slowed because there were not enough EVs available, while hybrids remained plentiful.
The distinction matters. Automakers treated a policy shift as a shift in consumer demand, leading to shortages that carry costs.
The average new vehicle sells for about $50,000 and the average new EV for about $55,000, according to Kelley Blue Book.
Drivers remain exposed to oil price swings with fewer alternatives. Despite the U.S. being the largest oil producer, the Persian Gulf conflict pushed pump prices sharply higher within three months because oil is priced globally.
Seven months into the conflict, fuel costs remained elevated. Oil was above $100 per barrel in mid-October, and diesel reached a record $6.52 per gallon on Sept. 22.
Electric vehicle sales have not recovered. According to Argonne’s data, 86,000 EVs sold in August, fewer than the 101,000 in May. Hybrid sales exceeded 216,000 per month throughout the summer.
A look ahead for electric vehicle sales
Federal policy has continued to constrain EV supply and affordability rather than expand it.
The fuel economy rule released Sept. 28, 2026, relaxes efficiency requirements for gasoline vehicles and, starting in 2028, ends a credit trading system that allowed manufacturers that exceeded standards, largely EV makers, to sell credits to those that fell short. That reduces regulatory incentives to produce EVs.
Regulators estimate buyers will save $1,289 on the sticker price of a new gasoline vehicle due to lower engineering and manufacturing costs for less efficient engines. The same analysis projects drivers will spend about $1,600 more on fuel over the vehicle’s life, based on fuel price forecasts below current levels. Economists have questioned whether the analysis fully accounts for fuel costs.
The U.S. has also effectively closed its market to Chinese automakers, even though nearly three-quarters of the world’s EVs are built in China. In 2024, Chinese consumers could choose from more than 130 EV models priced under $40,000, while U.S. buyers had four models under that threshold. In addition to tariffs exceeding 100% on China-built EVs, a Commerce Department rule bars vehicles from Chinese-linked automakers starting with model year 2027, even if assembled in the U.S. A pending bill would expand the restrictions to block Chinese investment in U.S. auto plants.
If gasoline remains expensive, the gap between the electric vehicles drivers want and what dealers can sell is likely to persist. Ending tax credits, easing fuel economy standards, and restricting Chinese technology all make EVs harder to build and buy, limiting affordable choices for U.S. consumers.