On September 30, 2025, the US federal government ended the most consequential demand-side subsidy in the history of American electric vehicle adoption. The Section 30D New Clean Vehicle Credit, which provided up to $7,500 per qualifying EV purchase, was terminated under the One Big Beautiful Bill Act signed by President Donald Trump on July 4, 2025. The credit, originally set to run through 2032 under the Inflation Reduction Act, was cut seven years early alongside the Section 25E used EV credit of up to $4,000.
The consequences materialized in the first full post-incentive quarter. According to Cox Automotive's Q1 2026 Industry Insights report, Americans purchased 212,600 new battery electric vehicles in the first three months of 2026, a 28% decline from 296,304 units in Q1 2025. New EV inventory ballooned to 130 days of supply, 46% higher than the 89-day supply for combustion vehicles. The US Energy Information Administration confirmed that battery electric vehicle market share, which reached a record 12% in September 2025 as consumers rushed purchases, fell to below 6% in each of the final three months of last year, marking the first annual decline in BEV sales and market share on record.
How a $7,500 Subsidy Became a Structural Market Variable
The scale of the pullback confirms what UC Berkeley economist Joseph Shapiro had warned in late 2024: removing the credit would cut EV demand by roughly 27% and cost annual registrations more than 317,000 units compared to a scenario where the credit remained. That projection proved accurate within one quarter.
The credit had done more than reduce purchase prices. Under the IRA's point-of-sale transfer mechanism, nearly half of all US EVs were leased by 2024, more than double the share seen three years prior. LFP battery adoption, critical minerals sourcing, and Foreign Entity of Concern compliance had all been calibrated around the credit's eligibility requirements. Its removal did not simply raise prices; it destabilized the entire incentive architecture that had attracted over $48.3 billion in US battery manufacturing investment and supported an estimated 62,700 jobs since 2022, according to the Center for Climate and Energy Solutions.
Automakers responded with short-term measures. Hyundai cut prices on the 2026 Ioniq 5 by approximately $10,000 at the moment the credit expired. General Motors extended dealer stock incentives allowing credits to be claimed on pre-purchased inventory. But as BloombergNEF noted in October 2025, these are temporary measures against a structural price disadvantage. With tariffs adding an estimated $3,800 per vehicle on top of the credit loss, the economics for price-sensitive buyers have reset to pre-2022 conditions.
Korean Battery Makers Bear the Sharpest Fallout
The corporate casualties of the credit's expiration are concentrated in South Korea. LG Energy Solution, Samsung SDI, and SK On had collectively invested approximately $45 billion in North American battery manufacturing capacity, attracted in significant part by the 45X Advanced Manufacturing Production Credit and the demand headroom created by the Section 30D subsidy.
According to the IEA's Global EV Outlook 2026, without US tax credits, LG Energy Solution's EBIT would have been negative $650 million in 2024 and negative $200 million in 2025 despite the company posting positive results both years. In Q1 2026, that mathematical abstraction became reality: LG Energy Solution reported its first quarterly operating loss of 207.8 billion won, equivalent to approximately $141 million. Samsung SDI posted a 22.5% year-on-year revenue decline and negative operating income in Q3 2025 before the credits even formally expired. SK On's wound was the most public: in December 2025, Ford and SK On dissolved BlueOval SK, the $11 billion joint venture to build US battery plants, at a cost of approximately 3.7 trillion won to SK Innovation's battery unit.
The strategic response has been a rapid pivot toward energy storage systems. Samsung SDI is targeting 30 GWh of US ESS battery manufacturing capacity by end-2026. LG Energy Solution signed a $4.3 billion agreement with Tesla Energy in 2025 to supply lithium iron phosphate cells for Megapack battery storage systems through 2030. SK On locked in 7.2 GWh with Flatiron Energy Development for grid-scale containerized storage starting late 2026. The pivot is rational but structurally challenging: ESS is a lower-margin, highly competitive business where Chinese producers, particularly CATL, already hold commanding positions.
China Consolidates an Unassailable Lead
The weakening of the US incentive framework accelerates a concentration dynamic that was already underway. According to SNE Research data covering January through October 2025, six major Chinese battery manufacturers controlled 68.9% of all global EV battery installations worldwide, up nearly three percentage points year-on-year. CATL alone held a 38.1% share of global installations, with BYD at 16.9%.
The IEA's 2026 Global EV Outlook confirmed that China accounted for over 80% of battery cell production in 2025 and even higher shares of active material production. Meanwhile, Chinese firms poured approximately $131 billion into battery manufacturing investment in 2025 and 2026 combined, representing 71% of the global total, according to Visual Capitalist. Rhodium Group data shows that CATL, BYD, and peers had invested $143 billion in foreign EV and battery ventures between 2014 and 2025, and in 2024 spent more on building overseas supply chains than on domestic expansion for the first time, redirecting capital toward Southeast Asia, Brazil, and Africa to circumvent US tariffs of up to 100% and EU tariffs of up to 35.3%.
The OBBBA's termination of 30D has, paradoxically, aided this consolidation. The sourcing requirements tied to the credit, which imposed penalties for using materials from Foreign Entities of Concern, had constrained Chinese battery cell adoption in the US market. With those requirements no longer operative as a demand lever, the structural cost advantage of Chinese LFP cells faces fewer regulatory counterweights in the post-subsidy environment.
Europe and Emerging Markets Fill the Investment Vacuum
Capital that had been directed toward US battery capacity is finding alternative destinations. LG Energy Solution and Samsung SDI have secured supply agreements with BMW and Mercedes-Benz in Europe, while SK On is expanding manufacturing output in Hungary. EY's Mobility Lens Forecaster projects that Europe's EV sales will cross 50% of new car sales by 2032 under tightening emissions rules, creating a durable demand base that US policy uncertainty cannot match in the near term.
In Southeast Asia, the IEA's 2026 Outlook noted that annual EV sales more than doubled to reach a market share of nearly 20%, led by Vietnam, Indonesia, and Thailand, making the region the fastest-growing major EV geography. India's domestic battery manufacturing capacity, led by Tata Motors in the LFP segment, continued its expansion trajectory. These emerging markets are absorbing Chinese supply chain investment and becoming increasingly relevant to the global battery demand outlook through 2035.
The EY forecast places US 50% BEV adoption at 2039, five years later than previously modeled, reflecting the combined effect of the credit loss, new import tariffs, and the withdrawal of federal tailpipe emissions enforcement. Hybrids are expected to peak at 34% of US sales by 2034, a market Toyota and Honda are positioned to capture. The US Energy Information Administration's data through Q4 2025 confirms this trend: hybrid electric vehicle sales hit a record 756,000 units in Q4 2025, up 57% year-on-year, while BEV sales fell.
What the Global Battery Market Forecast Looks Like Through 2035
Despite the US policy reversal, the long-term trajectory of the global EV battery market remains expansive, driven by Chinese domestic demand, European regulatory mandates, and emerging market adoption. Precedence Research projects the global EV battery market at $92.72 billion in 2025, growing to approximately $878.91 billion by 2035 at a CAGR of 25.22%. The Asia-Pacific segment alone is forecast to expand from $37.68 billion in 2025 to $376.13 billion by 2035, led by China and increasingly by India and Southeast Asia.
The battery chemistry mix will shift materially over the decade. LFP batteries, which CATL and BYD dominate, are gaining adoption in Europe and emerging markets. CATL announced its second-generation sodium-ion battery platform in 2025 alongside a dedicated commercial brand. General Motors and LG Energy Solution committed in May 2025 to produce lithium manganese-rich cells at Ultium Cells facilities in Ohio and Tennessee starting in 2028, targeting a 50% reduction in battery pack costs and over 400 miles of range, an effort to rebuild a cost-competitive US battery position without the direct support of demand-side subsidies.
Demand from energy storage systems will partially offset weakened US EV demand for Korean and Japanese battery producers. With AI data center electricity demand accelerating and grid-scale storage investment expanding, the ESS segment offers a growth corridor that does not depend on consumer EV purchases. However, the IEA projects that electricity demand from EVs could still exceed 1,500 TWh by 2035 globally, roughly six times 2025 levels, meaning the EV battery market remains the dominant long-term growth driver regardless of short-term US policy disruptions.
"The $7,500 tax credit was the bridge that made new EV pricing competitive. Without it, consumers who are price-sensitive enough to be motivated by gas prices are finding a better deal in the used EV market, or opting for a hybrid."
12 to 24 Month Outlook
The US new EV market is likely to remain structurally weak through mid-2027. Dealer inventory at 130 days of supply, combined with tariff-driven price pressure, limits meaningful volume recovery without fresh demand-side intervention. OEMs including GM, Mercedes-Benz, Volkswagen, and Nissan have already scaled back 2026 EV production plans. Used EV demand is surging as a result, up 12% to near-record levels in Q1 2026 according to Kelley Blue Book, but this segment does not generate new battery orders or support domestic cell manufacturing investments.
For battery manufacturers, the next 24 months will be defined by three pivots: the speed of ESS production line conversion in the US, the pace of supply agreements with European OEMs, and the ability to reduce per-unit costs to compete with Chinese LFP pricing in post-incentive environments. The BlueOval SK dissolution and LG Energy Solution's first quarterly loss mark the end of the expansion phase. What follows is a consolidation phase, with capital flowing toward China, Europe, and Southeast Asia while US battery manufacturing capacity sits significantly underutilized.
Frequently Asked Questions
Q1. When exactly did the US EV tax credit expire, and what law ended it?
The Section 30D New Clean Vehicle Credit and the Section 25E Used Clean Vehicle Credit both expired on September 30, 2025. They were terminated by the One Big Beautiful Bill Act, signed by President Trump on July 4, 2025. The credits had been enacted under the Inflation Reduction Act of 2022 and were originally scheduled to remain in force through the end of 2032.
Q2. How much did US EV sales fall after the tax credit expired?
New battery electric vehicle registrations in the US fell 28% year-on-year in Q1 2026, dropping to approximately 212,600 units from 296,304 in Q1 2025, according to Cox Automotive. EV market share fell from a peak of 10.6% in Q3 2025 to 5.8% in Q1 2026. New EV inventory reached 130 days of supply, nearly 50% higher than combustion vehicle inventory levels.
Q3. How does the US EV tax credit expiry affect the global battery market?
The expiry weakens demand for battery cells from US-based plants operated by Korean manufacturers like LG Energy Solution, Samsung SDI, and SK On, which collectively invested approximately $45 billion in North American battery manufacturing. It reduces procurement volumes tied to US automakers' EV production targets and accelerates capital reallocation toward Europe, Southeast Asia, and energy storage markets. China's CATL and BYD, which hold over 55% of combined global battery market share, are least exposed due to their minimal US market presence.
Q4. What is the global EV battery market forecast through 2035 despite the US policy change?
Precedence Research projects the global EV battery market will grow from $92.72 billion in 2025 to approximately $878.91 billion by 2035 at a CAGR of 25.22%. Growth is driven by Chinese domestic demand, European regulatory mandates requiring zero-emission vehicles, and accelerating EV adoption in Southeast Asia, India, and Latin America. The US policy reversal reshapes regional market shares but does not materially alter the global trajectory, which is anchored by markets where supportive policy remains intact.
Q5. Which battery companies are most at risk and which stand to benefit?
LG Energy Solution, Samsung SDI, and SK On face the most immediate stress, with heavily exposed US manufacturing positions, weakening OEM order books, and compressed margins. LG Energy Solution reported its first quarterly operating loss in Q1 2026. Ford and SK On dissolved their $11 billion BlueOval SK joint venture in December 2025. CATL and BYD are best positioned to benefit, given their cost leadership in LFP chemistry, dominant global market share, and ongoing overseas investment in markets with active EV incentive programs. European battery supply chains tied to Volkswagen Group, BMW, and Stellantis face a more complex outlook as EV targets ease but do not reverse.
Access DMR's Full Global EV Battery Market Report
Dimension Market Research's comprehensive report on the Global Electric Vehicle Battery Market provides granular forecasts by battery chemistry (LFP, NMC, NCA, solid-state), capacity segment, application, and geography through 2035. The report covers CATL, LG Energy Solution, Samsung SDI, BYD, Panasonic, and 20+ additional players, with analysis of supply chain risk, FEOC policy impact, and ESS market opportunity.
Download the Free Sample Report Here