Electric Vehicle Market Navigates Global Growth and Post-Tax Credit US Headwinds

Global EV Sales Maintain Strong Momentum Amid Regional Disparities

The global electric vehicle (EV) market demonstrated continued expansion in August 2025, with sales reaching 1.7 million units worldwide. This figure represents a 15% increase compared to August 2024 and contributed to a total of 12.5 million EVs sold in the first eight months of the year, up 25% year-to-date. Battery electric vehicles (BEVs) accounted for the majority of these sales at 1.16 million units.

Regional performance varied significantly. Europe experienced some of the fastest growth, with year-to-date sales up 31%, driven by strong performances in Germany (+45%) and the UK (+31%). The Chinese market also saw robust year-to-date growth of 25%, despite a slight slowdown in July-August compared to a period of increased subsidies in the prior year. North America recorded a 6% increase in year-to-date sales, reaching a monthly high in August as consumers accelerated purchases ahead of a critical regulatory deadline.

Chery Automobile's Landmark IPO and Intensifying Competition

A significant development in the EV sector was the successful listing of Chery Automobile Co., Ltd. [HK:9973] on the main board of the Hong Kong Stock Exchange on September 25. This marked the largest automotive IPO on HKEX in 2025, with Chery issuing 297 million H shares at HK$30.75 each, raising approximately HK$9.145 billion. The debut saw Chery's shares open 11.22% above their offering price, indicating strong investor confidence in the company's growth trajectory and its ambition to further technological innovation and global expansion.

Concurrently, competition in the global EV landscape continued to intensify. While Tesla [TSLA] reported record Q3 2025 deliveries of 497,099 vehicles, this surge was largely attributed to a rush by U.S. buyers to utilize the expiring $7,500 federal tax credit. This "front-loading of demand" masks underlying challenges, including a projected 40% decline in earnings per share compared to the same quarter last year. Meanwhile, Chinese manufacturers such as Geely, XPeng, and Leapmotor, along with others like Xiaomi EV and GWM, reported substantial sales growth and record deliveries, signaling their growing dominance.

Post-Tax Credit Uncertainty Shadows U.S. Market

The expiration of the U.S. federal EV tax credit on September 30, 2025, is poised to significantly reshape the domestic market. This incentive had spurred a "record monthly high" for North American EV purchases in August, with EVs constituting 9.1% of new U.S. car sales. However, analysts are projecting a substantial downturn in sales for the fourth quarter and early 2026.

"I think you're going to see third quarter EV sales remain strong simply because people want to buy before the Sept. 30 deadline," stated Karl Brauer, executive analyst at iSeeCars.com. "But after that... we're going to see a pretty big drop." Brauer anticipates the U.S. EV market share could drop "well below 4% immediately after the Sept. 30 incentive goes away."

General Motors (GM) North America's Senior VP, Duncan Aldred, echoed this sentiment, acknowledging, "There's no doubt we'll see lower EV sales next quarter... and it may take several months for the market to normalize." This contrasts with the view of Loren McDonald, Chief Analyst at Paren, who believes the federal tax credit's impact on sales is "overplayed" for a majority of buyers, suggesting it functions more as a discount than a primary purchase driver.

Tesla's Eroding Market Share and Strategic Pivot

The intensifying competition and the impending shift in the U.S. regulatory environment have put pressure on established players, notably Tesla. The company's U.S. EV market share fell to 38% in August 2025, marking its lowest point since October 2017, down from over 80% previously. Globally, Tesla's sales have seen a roughly 10% decline in 2025, with European sales down as much as 40% and Chinese sales down about 6%. This decline comes despite a robust balance sheet featuring $37 billion in cash against $30 billion in short-term debt.

In response to these market dynamics and margin pressures from ongoing price cuts, Tesla's strategy is pivoting towards artificial intelligence, robotaxis, and humanoid robots. CEO Elon Musk views these technologies as crucial for future growth, aiming to offset challenges from intense competition, the dampening effect of incentive losses, supply chain sensitivities, and its own high valuation (above 100x earnings).

Chinese EV Makers Expand Influence and Profitability

Chinese EV manufacturers are not only dominating their home market but also expanding their global footprint. Chery's 2024 passenger car sales increased by 49.4% year-on-year, ranking first among the world's top 20 passenger car companies for growth across new energy, fuel, domestic, and overseas sales. The company's operating revenue soared to CNY 269,897 million in 2024, with net profit reaching CNY 14,334 million.

In terms of profitability, Leapmotor achieved semi-annual profitability for the first time in the first half of 2025, with a net profit of 33.03 million yuan. XPeng [HK:9868], while still recording a net loss of 480 million yuan in Q2, significantly narrowed its loss by 62.8% year-on-year, driven by revenue growth and improved gross profit margins. These companies, alongside BYD [BYDDY], are challenging the traditional market leaders, with Chery's current price-to-earnings (P/E) ratio of approximately 12 offering a potential valuation upside compared to BYD's 22 and Geely Auto's [HK:0175] 20.

Outlook: Volatility and Strategic Adjustments Ahead

The coming quarters are expected to be challenging for the EV sector, particularly in the U.S. post-tax credit expiry. Automakers may resort to price reductions to stimulate demand, reminiscent of GM's strategy of lowering the Bolt's price by $7,500 after its incentives ran out. This will likely compress profit margins across the board.

For Tesla, sustained momentum will depend on its ability to execute its long-term vision in AI and robotics, coupled with mitigating external risks and rebuilding brand trust. Meanwhile, Chinese manufacturers like Chery, with substantial IPO capital and clear investment plans for R&D and overseas expansion, are poised to continue their aggressive pursuit of global market share. The overall market anticipates continued high volatility, with companies needing to adapt swiftly to evolving regulatory landscapes and intense competitive pressures. The race for technological innovation and cost efficiency will be paramount for securing future growth in this dynamic sector.