After the $7,500 EV Credit: Can the Industry Survive the Lithium Crunch?

In September 2025, the federal incentive that helped encourage mass electric-vehicle (EV) adoption came to an end. The tax credits of $7,500 for new EVs and up to $4,000 for used EVs officially expired on September 30. As a result, we are now faced with an EV market uncertain about future demand and facing looming questions about how to keep up with lithium demand.

The Credit Cliff and Its Market Impact

The tax credit served as a vital tool to make EVs more affordable to consumers. With its expiration, consumers now face higher out-the-door-costs, likely cooling demand. “The EV market is going to collapse,” Christian Menuier, chairman of Nissan Americas, warned. This comes as estimates predict a roughly 27% drop in new registrations after the credit disappears. Looking to the future, automakers aren’t standing still, with many looking to trim production and focus more on fleet and lease channels where federal incentives still exist. For example, General Motors recently announced its plans to cut output at its Detroit EV plant by 50% starting in January.

What Q3 Auto-earnings are Signalling

Recent automaker earnings calls show how the industry is already adjusting. Tesla reported a record half a million global deliveries in the third quarter, yet net income was down 37% year over year as price cuts and rising costs dug into margins. On the flip side, General Motors boasted net income and revenue increases while warning of an expected $1.6 billion charge due to EV demand softness going forward. These figures reflect three broader takeaways:

·       The pull-forward effect of the tax credit on EV sales

·       The pressure to cut costs is building

·       Companies are looking to balance out production between EV and combustion vehicles going forward.

Lithium: Opportunity and Constraint

While demand faces challenges, the supply side has struggles of its own. Global demand for lithium – the mineral key to producing EV batteries – is projected to at least triple by 2035. Supply, growth, however, will lag far behind, with Boston Consulting Group expecting a shortage of over 1.1 million tons. The vast disparity will only further drive up manufacturing prices of EVs, pushing automakers to re-evaluate levels of production. Battery cost declines have been a tailwind for EV production, but if the supply chain can no longer keep up, margins and prices will come under pressure.

Investor Outlook

For investors, the imbalance is both a risk and an opportunity. Lithium’s price, which fell sharply in 2023 after a pandemic-era boom, is now showing signs of stabilization as supply constraints continue to emerge. Automakers and battery producers with diversified supply chains, such as Tesla’s direct sourcing deals or BYD’s vertical integration, will likely weather out the volatility better than smaller firms. Meanwhile, miners and refiners in Australia and China stand to benefit from the price increases associated with the demand spike. The lithium rush underscores a common theme preventing growth today: energy and production are not constrained by ambition, but rather by access to critical materials. As an investor, it’s important to understand which companies will capitalize on the upside in an EV market increasingly concerned with such scarce resources.

Conclusion

The end of the $7,500 credit marks more than a policy change; it’s a stress test for the EV industry. Whether automakers can sustain demand without subsidies or access enough lithium to meet it will define the market’s next decade. The next chapter of EVs might not be about when everyone will buy one, but rather who can still afford one.