China's rapid EV momentum shifts global industry focus amid uneven market recovery

The global automotive market is moving into a slower, more uneven phase after the pandemic-era disruptions that distorted production and demand. New-vehicle sales are expected to edge higher through 2025 and 2026, but the broad picture is one of stabilisation rather than a strong rebound. PwC says pricing has already done much of the work that demand can absorb in mature markets, with average transaction prices in the US and Europe now above $45,000 and little sign of relief for buyers. That is helping to cap volumes even as manufacturers continue to rebuild margins.

The biggest structural shift remains electrification, but its pace now varies sharply by region. According to the International Energy Agency, global electric car sales grew by 20% in 2025 to more than 20 million units, putting electric cars at roughly a quarter of all new sales. Europe posted the strongest growth among major markets, helped by tighter CO₂ rules, while the US remained close to 10% as tax-credit changes unsettled the market. In China, however, the transition is moving faster than elsewhere: S&P Global expects the country to become the first major market where battery electrics and plug-in hybrids account for about half of new light-vehicle sales, with price parity between electric and combustion models now reshaping buying decisions.

That Chinese momentum is becoming central to the global industry. S&P Global says China will account for nearly two-thirds of global light-vehicle EV sales in 2026, and BCG has noted that in the first half of 2025 Chinese plug-in EV sales were 1.5 times the rest of the world combined. The implication for global carmakers is clear: the centre of gravity in electrification has moved east, and the competitive benchmark is increasingly being set by Chinese pricing, scale and supply-chain integration.

Elsewhere, the market is more hesitant. In the US, electric-car sales have proved more vulnerable to policy changes than to fuel prices alone. The end of federal tax credits coincided with weaker demand late in 2025, while hybrids have continued to take share as a lower-friction option for buyers who are not yet ready to commit to full electrification. In Europe, electrification is advancing more steadily, but the picture is mixed. According to the IEA, electric car sales in Europe rose by more than 30% in 2025 to reach 28% of the market, yet that growth sits against a wider backdrop of subdued consumer confidence, higher financing costs and persistent pressure on household budgets.

Those pressures are not limited to the showroom. PwC argues that mature markets are now approaching a demand ceiling, with sales likely to flatten through 2030 as affordability tightens, lending conditions harden and consumers increasingly opt for used vehicles or delay purchases altogether. That trend matters for industrial decarbonisation because it affects the speed at which fleets turn over and cleaner technologies reach scale. A slower replacement cycle can delay emissions cuts even when new-vehicle technology improves quickly.

At the same time, the economics of building vehicles remain challenging. Semiconductor shortages have eased, but higher raw-material costs, supply-chain complexity and inflation have left OEMs with limited room to manoeuvre. European manufacturers face a particularly difficult mix: elevated energy prices, carbon compliance costs and rising wages are all feeding into production costs. For industrial groups looking at decarbonisation, that matters because the most climate-efficient plant is also usually the one that can run at scale with low-cost, low-carbon energy. In Europe, that equation is under strain.

Battery and charging infrastructure continue to expand, but unevenly. The availability of public charging is improving in all major markets, yet coverage and reliability remain patchy outside China and parts of Europe. That leaves a large share of charging dependent on homes, depots and workplaces, which is manageable in some markets and a major barrier in others. It also reinforces the case for hybrid models, range-extended vehicles and carefully phased infrastructure investment rather than assuming a straight-line transition to battery-only mobility.

Emerging markets are becoming more important to the story. The IEA says Southeast Asia and Latin America saw especially strong electric-car growth in 2025, with Brazil and Mexico leading the latter region. Even so, these markets are starting from a low base, and affordability remains the decisive factor. For industrial players, that means future growth in clean mobility will not be driven only by premium battery vehicles, but also by lower-cost platforms, local assembly, and new business models built around charging, service and fleet management.

The broader outlook is therefore one of divergence. China is moving quickly towards EV majority sales, Europe is progressing under regulatory pressure, the US is advancing more unevenly, and many other markets are still waiting for lower prices and better infrastructure. For automakers, suppliers and energy-intensive manufacturers, the challenge is no longer simply to prepare for electrification, but to compete in a world where the transition is real, but far from uniform.