J.D. Power’s latest US auto sales report estimates the market share of fully electric vehicles and plug-in hybrids to decline year on year in January.
This decline is driven by larger incentives for gasoline-powered vehicles, ongoing profit pressure from tariffs, and the continued slowdown in EV sales following the end of the $7,500 federal tax credit last September.
According to Thomas King, president of OEM Solutions at J.D. Power, January is historically the lowest sales month of the year and the least predictive of full-year performance.
Despite this, retail sales are expected to show modest growth, increasing by about 1,300 units compared to last year.
“As with every January, winter storms have the potential to create some disruption to sales patterns,” the analyst noted.
However, he flagged that the “key factors in assessing January’s performance are the co-mingling of lower EV sales, higher incentives on internal combustion engine (ICE) vehicles and ongoing profit pressure from tariffs.”
Tariffs are a meaningful challenge to manufacturers, King stated, as the balance between unit profitability and “the need to remain competitive in the marketplace” is difficult.
Despite the challenges, Thomas King’s full-year outlook is “relatively positive.”
He notes that changes in the supply chain could help partially offset tariffs, even though tariff-related profit pressure for automakers is expected to continue throughout the year.
EVs vs ICE
J.D. Power estimates that EV retail sales will “remain depressed” as transaction prices jump on reduced incentives, both federal and from the automakers.
“In fact, EVs will account for just 6.6% of new retail sales, down 2.9 percentage points from a year ago,” Thomas King said.
At the same time, the analyst noted that “manufacturers are using some of the money saved from selling fewer EVs with extremely large discounts to improve discounts on ICE vehicles.”
With both OEMs and dealers dealing with the restructuring on the EV segment, “there is likely to be an opportunity to improve affordability of ICE vehicles,” as production shifts to a more varied mix of models.
This is the approach taken by Detroit automakers Ford and General Motors, for example.
Both companies paused production of EV models last year, and changes to their EV strategies resulted in multi-billion-dollar losses. Ford reported a $19.5 billion write-down, while GM warned of a $6 billion impairment.
The automakers have pledged to refocus on production of gasoline and hybrid models.
Ford’s EV sales fell 14% in 2025 compared with the previous year, with the decline accelerating in the fourth quarter after the federal tax credit expired.
General Motors, meanwhile, posted a 48% increase in EV sales for the full year, but its fourth-quarter sales dropped 43% year over year.
Tyson Jominy, J.D. Power’s Senior VP of OEM Customer Success, wrote in the latest report that “US alternative powertrain sector is entering the new year with performance that closely mirrors late 2025.”
According to the analyst, early January data showed that EV and plug-in hybrid sales were nearly four percentage points lower than a year ago, with traditional internal combustion vehicles and regular hybrids capturing the lost share.
“Both EVs and PHEVs are on track to finish the month below 8% retail share, a notable shift from the nearly 12% combined share recorded last January,” Jominy said.
ASP and Incentives
The average retail price for a new vehicle in January is expected to reach $45,880, up $512 (1.1%) from January 2025.
Electric vehicles saw the larger increase, with the average price climbing 18.1% to $51,981, while other vehicles are expected to have an ASP just 0.9% above a year ago, at $45,510.
“Affordability pressure remains significant, with the average monthly finance payment reaching $760, up $24 from a year ago,” Thomas King stated.
The analyst added that the average manufacturer incentive per vehicle is expected to reach $3,192, up $25 from a year ago.
“The changes in average discounts are heavily influenced by the decline in EV sales,” he explained.
In January, EV discounts are expected to average $11,212 — down $1,820 from January 2025 and $353 from December 2025.
By comparison, discounts on non-electric vehicles are projected at $3,004, an increase of $403 from last year.
Still, Tyson Jominy noted that “EV incentive spending is highest in the industry, climbing more than $2,000 from a year ago as manufacturers work to offset the loss of federal tax credits.”
Spending in January averages roughly $5,700 per (electric) vehicle, a few hundred dollars higher than for plug-in hybrids and nearly $3,500 more than for traditional hybrids.
EV leasing is also changing: only 44% of EV transactions are now leases, down 8 percentage points from December and a steep 30 points compared with the same month last year.
EV Makers
Pure EV maker Rivian updated its leasing prices earlier this year, with increases in monthly payments registered across the lineup.
Additionally, the Irvine-based company offers 0% APR on 60-month leasing contracts on certain variants of the R1S and R1T models.
Lucid Motors has extended its $7,500 Lucid Advantage Credit through mid-January on the Gravity Grand Touring and launched a limited-time lease offer for the Touring version at $749 per month for 39 months.
Available until January 18, the incentive combines a $7,500 lease credit with a $5,000 on-site bonus as the California-based EV maker works to move existing inventory.
Elon Musk-led Tesla offers 0% APR on Model Y purchases, with a rate of 2.99% on its Model 3 sedan.
Last month, most EV makers saw a sales decline in the US, including Rivian and Tesla.
table usAccording to data published by Cox Automotive earlier this month, Tesla’s fourth quarter sales dropped 15% year over year, while Rivian‘s fell 31.3%.
Lucid registered a 55.2% jump compared to 2024, as the company began deliveries and production ramp of its second model, the Gravity SUV.
