The US surpassed Germany to become the world’s second-largest electric vehicle market after China in the first quarter of the year, as EV sales jumped more than 79 per cent annually in the North American country, a report has shown.

The growth in the January-March period was driven by more customers switching to eco-friendly driving options as well as the government’s tax credit subsidy, Hong Kong-based researcher Counterpoint Research said in a report on Thursday.

Battery EVs accounted for nearly 81 per cent of all passenger EV sales in the US, while plug-in hybrids made up the rest.

The report did not disclose the exact number of EVs sold during the period.

“The US economy is showing signs of recovery with lower inflation and improving customer sentiment. Although EV sales saw strong growth during the quarter, those of conventional passenger vehicles remained flat,” said Abhik Mukherjee, research analyst at Counterpoint.

“One reason was the introduction of an EV tax credit of up to $7,500, which has played a crucial role in driving up EV sales.”

Currently, about 20 models offered by Tesla, GM, Ford, Stellantis, Rivian and Volkswagen are eligible for the tax credit.

However, strict eligibility conditions set by the US government have excluded brands such as Hyundai, Nissan, BMW, Audi and Volvo from benefiting from the EV tax credit this year, Mr Mukherjee said.

In the January-March period, EV manufacturer Tesla outperformed the combined sales of the 18 automotive groups, which collectively represent 34 brands in the US, the report said.

The top 10 EV models in the US accounted for nearly 69 per cent of overall passenger EV sales during the quarter.

Tesla’s Model Y was the best-selling EV model.

Counterpoint predicts that US EV sales will reach about 1.5 million units this year if economic conditions continue to improve.

“With the US economy showing signs of recovery, the auto industry, particularly the EV sector, is being helped by government policies announced last year,” research director Jeff Fieldhack said.

“Tax credits for new and even used EVs are helping consumers, while investments in streamlining the EV battery supply chain, the establishment of a robust network of EV charging stations and the setting up of battery recycling plants nationwide will all support EV sales growth.”

Globally, one in every seven cars sold during the first quarter was an EV, Counterpoint said in a separate report released on Tuesday.

Overall sales are expected to reach more than 14.5 million units by the end of this year, it added.

China’s BYD Auto, which has started operations in major European countries including Germany, France, the UK, Italy, Netherlands and Sweden in the first quarter, took 21 per cent of the global passenger EV market share in the three months to March 31.

Texas-headquartered Tesla, which closed the first quarter with a record number of deliveries at 422,000, accounted for nearly 16 per cent of the market share.

It slashed prices of the Model Y and Model 3 in January, resulting in the Model Y becoming the best-selling passenger car model.

In a boost to Tesla, US car makers General Motors and Ford have agreed to use the EV company’s charging network – a move that could make Tesla Superchargers an industry standard in the country.

Updated: June 16, 2023, 5:30 AM