Earlier this year, Tesla CEO Elon Musk argued that ending federal subsidies like the $7,500 EV tax credit would ultimately benefit Tesla more than it would hurt the company. At the time, it sounded counterintuitive. But months later, he may have been right, at least in part.
“I guess there would be, like, some impact. But I think it would be devastating for our competitors and would hurt Tesla slightly,” Musk said on Tesla’s second-quarter earnings call. “But long term, probably actually helps Tesla, would be my guess.”
After those comments, Tesla posted a record quarter as buyers rushed to lock in vehicles before the tax credit expired. Now, with the credit gone, the hangover has arrived: sales are expected to fall as demand that was pulled forward earlier in the year dries up.
Sales Down, Share Up
Fresh monthly data from Cox Automotive confirms that Tesla’s U.S. sales are indeed declining but with an unexpected twist. Its market share is rising.
At the end of the third quarter, the final period with the federal EV credit, Tesla’s market share had fallen to 41%, down from roughly 80% five years ago. But in October, that figure jumped to 55%, and in November it climbed again to 57%.
That happened even as Tesla’s absolute sales dropped sharply, falling from more than 60,000 vehicles in September to fewer than 40,000 in November. The explanation is simple: Tesla’s sales are falling, just not as fast as everyone else’s.
“The subsidy removal essentially stress-tested every brand's underlying demand, and Tesla's decline was significantly smaller,” Cox Director of Industry Insights Stephanie Valdez Streaty told Sherwood. “Whether that's due to brand strength, infrastructure advantages like the Supercharger network, or simply less price-sensitive buyers is debatable, but the market-share result is mathematical: when everyone declines, whoever declines least gains share.”
Legacy Automakers Hit the Brakes
Other major automakers are feeling the pressure far more acutely as EV demand cools and regulatory tailwinds weaken.
GM announced it is cutting back EV production in response to softer demand. Stellantis scrapped plans to go fully electric by 2030. Even Toyota is delaying parts of its EV battery program.
At the same time, the federal government is reconsidering and rolling back emissions rules that had previously pushed automakers toward electrification, giving traditional carmakers less incentive to stay aggressive on EVs.
Pure-Play EVs See an Opening
As legacy manufacturers pull back, EV-only companies are spotting opportunity.
“I would say in the medium to long term, it actually simplifies things for Rivian,” Rivian CEO RJ Scaringe said recently at the Rotary Club of Atlanta. “Narrowly and myopically through the lens of Rivian, it actually creates less competition.”
Rivian’s market share has also edged higher, though not nearly as much as Tesla’s.
The result is a paradoxical outcome: the end of the EV tax credit appears to be shrinking the overall EV market while simultaneously helping Tesla and other pure-play EV makers capture a larger slice of it.