Mercedes Halts Production of Electric Vehicles in the U.S. - Reason Explained
The U.S. electric vehicle (EV) market is currently experiencing a slowdown in growth, with EV sales rising only 8.1% in early 2025 compared to the previous year. This slowdown can be attributed to several factors, including the temporary halt of orders by Mercedes-Benz and the elimination of the $7,500 federal tax credit for new EVs.
The elimination of the tax credit has increased the effective purchase price of EVs by more than 20%, exacerbating affordability challenges and potentially pushing EV market share below 7% by the end of 2025. Mercedes-Benz has temporarily halted orders for its electric vehicles (EVs) in the U.S., citing current unfavorable market conditions. Vehicles scheduled for production before September 1 will still be delivered. The tax credit for electric vehicles will expire on September 30.
The halt of orders by Mercedes-Benz signals caution amid these tougher market conditions and intensifying competition. The EV market faces a crowded pipeline of more than 30 new models projected over the next 18 months amid stagnant total demand. Elevated purchase prices, increased vehicle weight, higher maintenance and insurance costs, along with state EV license fees replacing gasoline taxes, are increasing the economic disadvantages for consumers compared to internal combustion engine vehicles.
Despite these near-term headwinds, the long-term outlook for the U.S. EV market remains robust. The market size was estimated at $131.3 billion in 2024 and is projected to more than triple by 2034, reaching $439 billion. Key states like California, New York, Texas, and Illinois are expected to lead significant growth through the next decade.
Additionally, evolving consumer preferences—especially among urban and younger buyers—and a shift toward hybrid and plug-in hybrid models may help sustain electrification momentum despite the loss of incentives. Electric vehicle sales in Europe and China have shown a more positive trend, increasing by 25% and 35% respectively during the same period.
In summary, while short-term market conditions are challenging with stalled growth and increased costs for consumers, the U.S. EV market’s long-term trajectory remains positive due to continued innovation, broader geographic adoption, and evolving consumer preferences. The representative for Mercedes-Benz remains optimistic about the future, expressing belief that U.S. interest in electric vehicles would recover over time. However, the exact timeline for the reopening of U.S. order banks for EQ models remains undisclosed due to competitive reasons.
- The elimination of the tax credit for new electric vehicles has increased the effective purchase price by more than 20%, creating financial challenges for consumers.
- Within the tech sector, the electric vehicle market faces a crowded pipeline of innovative models in the coming months, including hybrid and plug-in hybrid models.
