The third quarter looks to be unsurprisingly great for automakers in general, and electric cars in particular. At least in the United States, where an expiring tax credit has forced the fence-sitters into the market. Automakers are going to be reporting big numbers and then bracing for impact.
How hard that impact will be is going to depend a lot on the mix of powertrains those automakers can offer. As regular readers of The Morning Dump already know, we’re in the second year of the Year of the Hybrid and the first year of the Decade of the EREV, so hybrid automakers might be fine. Tarffis and everything else are going to be at play, of course, but one key factor will be electric incentives.
The rush to get cars out the door has probably pulled forward a lot of EV sales, which has less of an impact on companies that also sell a lot of vehicles with other powertrains (Toyota, Honda, Ford, GM, et cetera), but a big impact on pure-EV automakers (Lucid, Tesla, Rivian, Polestar). In response to the sunsetting of the federal tax credit, Tesla has raised prices on its leases, though it’s also offering a $6,500 tax credit. With Tesla fighting a losing price war in Asia, how long can it keep that credit in place?
Hyundai is responding by lowering prices on its electric vehicles as well as offering its own credit. We already know that Ford and GM are pursuing a similar strategy. GM will report soon, but we already have data from Ford, Kia, and Hyundai. So far, they seem fairly resilient.
Companies that don’t primarily make electric cars can probably pump money indefinitely into the market by transferring profits, but how long can Tesla hold out?
The $6,500 Tesla Lease Credit ‘Is Subject To Change Or End At Any Time’
Corresponding with the end of the IRA Tax Credit at midnight last night, Tesla increased its lease prices (as many others noticed). It works out to about an 11% price increase for the Model Y and Model 3, or a range of about $50-$70, depending on trim and the specifics of where you live.
You might notice that 11% is not $7,500 worth of the value of a Model Y, which is $44,990 for a Long Range Rear-Wheel Drive model. While there may be many reasons why you wouldn’t want, or wouldn’t like a Model Y, that’s still a good deal.
Some of the price break seemingly comes from Tesla’s $6,500 lease credit, which you have to find buried in the fine print above. Here’s what it says:
Monthly lease payment already includes the $6,500 Tesla lease credit, which is subject to change or end at any time. Order does not guarantee eligibility.
At least when it comes to leasing, the loss of the tax credit is being partially offset by this subsidy for an unknown length of time. Tesla isn’t alone here, as both Ford and GM have attempted their own plan to extend the tax credit as long as they can. The difference is that Ford and GM are trying to use a quirk in the law to frontload the credit, and should that go away, both companies have robust gas and hybrid truck sales to offset some of the cost.
How does Tesla offset these costs? The company only makes electric cars, and its pickup truck is probably a money loser. It could try to counter with sales in other markets, and Europe, at least, isn’t a complete mess, as sales were up 20.5% in Denmark. Trying to counter losses in the US with gains in Denmark is a little like when my daughter used to ask me to sit on one side of the see-saw. China is the obvious one, as it’s a huge market with a bigger share of electric car purchases. Insurance data seems to show that Tesla sales probably dropped by 8% in Q3 there.
Tesla’s Q3 should look ok due to the big increase in sales in the United States, but can that increase match other automakers, or will it continue to lose share? Could Q3 be the quarter where Tesla’s sales drop below 1/3rd of the market?
This new paradigm will be interesting for the company as it’s suddenly not in a position where it has a lot of pricing power relative to the competition, at least if it wants to maintain any sort of margin. Will Tesla decide it wants to make money more than it needs to hit some sort of sales goal and pull those lease incentives? Will it blink first?
Hyundai Sales Hit A Record In Q3 As Company Extends Incentives, Lower Prices
Hyundai didn’t blink because, frankly, Hyundai is selling a ton of cars right now. Sure, there’s the ever-present tariff cost, but the company must think it can weather them fairly well for the moment.
With the end of the tax credit comes a big, 153% year-over-year increase in EV sales for Hyundai, contributing to a 14% increase overall and a new September sales record of 71,003 units.
Some of this comes down to strategy, as Hyundai offers a great mix of ICE, Hybrid, PHEV, and electric cars. It’s the dream, really, from a product standpoint. All it’s missing is a real truck (though I do really like the Santa Cruz, don’t get it twisted!). The biggest growth, besides EVs, comes with the excellent new Santa Fe and affordable vehicles like the Venue and Elantra.
When it comes to EVs, all models had strong months, but the Ioniq 5 was the standout, with a 152% year-over-year increase in September to 8,408 vehicles, putting it ahead of even the Palisade.
While this volume probably isn’t going to last after the expiration of the tax credit, the pricing should roughly stay in line with where it is now:
“September marked our strongest third quarter on record, fueled by a diverse product lineup, outstanding dealer support, and robust consumer demand,” said Randy Parker, president and CEO of Hyundai Motor North America. “As we move into October, we’re introducing new programs to keep our vehicles accessible, such as repositioning the 2025 IONIQ 5 with extended $7,500 cash incentives and offering up to $9,800 in price reductions on 2026 IONIQ 5 models, reinforcing Hyundai’s legacy of delivering exceptional value and support. While the $7,500 EV credit has expired, our electrification strategy has always extended beyond incentives. We invested in EV innovation well before the IRA and remain steadfast in our commitment to affordability, quality, and customer care.”
It sounds like Hyundai will just give you the $7,500 off a 2025 MY car, and will make the 2026 that much cheaper (or more), so it’s basically a wash.
Kia Has Another Great Month/Quarter, But Doesn’t Promise Incentives
While Kia remains a little behind Hyundai, both saw a lot of growth in September. For Kia, total sales were up 11% to 65,507 units. Quarterly sales also hit an all-time record at 219,637 units.
EV9 sales are still down YTD, but up almost 50% in the month of September. The same is basically true for the EV6, although the September increase in sales wasn’t quite as strong.
Let’s focus on what’s actually important: Kia Carnival sales are up 85% so far YTD. In September, Kia sold more Carnivals than K5s, Souls, Niros, Seltos, EV9s, or EV6s (individually, not collectively). Hell yeah. Hybrid vans for everyone.
What’s interesting is that Kia didn’t make any announcements about countering the loss of the tax credit, though I expect the company will do something.
Ford Keeps Selling A Curiously High Number Of Broncos
The Jeep Wrangler will probably outsell the Ford Bronco again this year, but damn if it ain’t gonna be closer than I’d have guessed a couple of years ago. The new Bronco is my personal preference when it comes to this class of trucks (in spite of Autopian leadership’s obvious Jeep fascination), so I’m not selling the vehicle short. It’s just that Wrangler and 4Runner have such a strong brand, and Bronco just jumped right in there.
According to Ford’s latest sales release, total sales were up 9.1% for the quarter for Ford and down 7.6% for Lincoln, which probably has something to do with one of its vehicles being a Chinese import.
Blah blah EV sales, Mach-E, people love hybrids, yada yada, Maverick.
Ford sold 109,921 Broncos this year (full bar Broncos, not Bronco Sports), which is up a crazy 42.9% YTD. I’d also add that Ford, via Ford Pro, is saying it increased subs by about 30% to 815,000 paid software subscribers. Is Ford quietly the one automaker that is actually a technology company? I gotta think about that some more.
The Mach-E is good for what it is, but less competitive if it’s not cheaper than offerings from Hyundai and Tesla, so I assume the company will need to continue to pump incentives into that platform to keep it selling after the tax credit loophole finally closes.
What I’m Listening To While Writing TMD
As previously stated, TMD is a pro-Kelly Clarkson operation. In honor of today’s news and this week’s theme, here’s Kelly Clarkson with “Stronger (What Doesn’t Kill You).”
The Big Question
How bad are Stellantis sales going to be in Q3?
Top Photo: Tesla
Ford Maverick is the No 3. bestselling Ford model.
If anyone is interested to know.
A tax credit “expiring” means it’s running out the clock (when ends in something like 7 years). The referenced tax credit has been “spitefully terminated” in an effort to “own the libs” and throw favors at cronies. Word choice matters.
Eating some Crow this morning Matt. I love to see it! Can’t wait to read this mornings dump.
Tesla has a deranged market cap (for now) and I believe 36 billion in cash, so it could do some crazy things on the way down, like buy other automakers. It’s not like we have any antitrust enforcement. But that would tilt its hand that it is desperate to cling to auto sales and does not really see a future in Optimus, or selling crappy, LIDAR-less self driving to other automakers, or the crypto infinite money machine, or whatever else it is selling moronic retail investors and FOMO institutions this week.
How Tesla’s stock has spike to hard in the last month is a mystery to me. I can only deduces it’s tied to Elon’s reduced presence in the news.
If you ask me, Tesla’s been asleep at the wheel and driving on Autopilot for quite a while now.
record sales.
Gold record? LPs or 45s?
Doesn’t matter, nobody who’s anybody buys records any more. Last I heard, even the hipsters had moved on to cassette tapes. (I’m pretty sure Dalton and JD over at Pole Barn Garage are the only people who actually go *looking* for eight-tracks, if you can call “incidentally finding them in old cars and getting visibly excited” “looking”, hmmmph.)
Also, just because you have ‘record sales’ doesn’t mean you’re popular — and that assumes record *high* sales, which Greg did not specify.
Also also, look at their sales in China. I don’t know anyone from China who’s a moron, particularly in the usual fashion of the loudmouthed American who thinks the world of themselves, and that everyone else is a halfwit. (…and, for what it’s worth, I’m pretty convinced I’m one of the halfwits myself!) But I *did* know this one fellow who moved to China for a decade, and when he came home, he was married, happy, and a heck of a lot smarter and wiser.
…or, as my friend Jody puts it: most people are idiots! (Jody works in I.T., if that tells you anything.)
It’s interesting that Hyundai and Kia are so closely positioned yet still sell a ton
The Bronco gets trash MPG, and it would be really tempting if it didn’t. I see a ton out West, but I was shocked at how relatively few I saw in New England
Kinda yea, but it’s close to the Wrangler. why they haven’t put a hybrid in it is anyone’s guess.
Ford is behind on both hybrid and PHEV portfolios. I haven’t heard much about their plans to increase it in those directions. The biggest change was a hybrid F-150
For what it is (a lifted brick) it gets great mileage and great power out of the little 4 banger, been an amazing car for the past year