After a record-setting sprint, the US electric vehicle market is hitting a wall.
EV sales are expected to fall 37% in the fourth quarter to roughly 230,000 units, down from 364,000 a year ago, according to new estimates from Cox Automotive. The sharp drop follows a pull-forward effect earlier this year, when buyers rushed to lock in the federal $7,500 EV tax credit before it expired.
At first glance, that sounds like bad news for everyone in the EV business. But for Tesla $TSLA ( ▼ 0.2% ) , it may actually be the opposite.
Tesla is losing sales, but gaining ground
Wall Street expects Tesla’s Q4 deliveries to decline about 9.5% year over year to roughly 449,000 vehicles, according to FactSet. That’s a meaningful slowdown, but far less severe than the broader EV market’s projected collapse.
The math matters. If overall EV sales are falling nearly 40% while Tesla is down less than 10%, Tesla is effectively gaining market share. And as legacy automakers pull back on EV production and delay new launches, Tesla and other pure-play EV companies are left competing for a larger slice of a smaller market.
That dynamic has played out before. When demand weakens, scale, pricing power, and supply chain control tend to matter more than flashy product lineups. Tesla has all three.
Why affordability is now the real bottleneck
The data also reinforces just how important the federal tax credit was in propping up EV demand. Without it, EVs are still meaningfully more expensive than gas-powered alternatives.
Cox Automotive notes there are currently only nine EV models priced under $40,000 in the US, compared with 56 internal combustion vehicles below that threshold. In other words, once the subsidy disappeared, so did a big chunk of demand.
That’s where newer entrants like Slate Auto could benefit. Slate still plans to launch its EV truck next year with a mid-$20,000 price point, which would undercut nearly every EV on the market. If it hits that target, buyers may not need a tax credit at all.
For now, though, the EV slowdown looks less like a crisis for Tesla and more like a consolidation phase, one where the biggest player walks away with even more control of the market.