Which of the world’s automotive markets will electrify the fastest?

13 January 2026

Is China’s lead insurmountable? Could Northern America make a comeback? What does the Automotive Package mean for Europe? How are the non-Triad markets faring? EV Volumes’ head of forecasting, Neil King, unpacks the latest predictions with Autovista24 editor Tom Geggus.

Covering passenger cars and light-commercial vehicles (LCVs), EV Volumes has stepped up its global light-vehicle market forecast. Data for 2025 is expected to confirm 92.7-million-unit sales, up by 4% year on year. This is compared with the 3.6% growth outlined in September’s forecast. 

EVs, including battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), are predicted to make up 25.5% of these sales. This means approximately 23.7 million new plug-in vehicles will hit roads worldwide. Moving forward, improved outlooks in China, the non-Triad markets, and Europe offset the downgrade to Northern America.

The global electric vehicle (EV) share is forecast to reach 27.5% in 2026, 43.2% in 2030, 64.6% in 2035, and 83.2% in 2040. That said, budget pressures and policy shifts may threaten investment in incentives and charging infrastructure. Various legacy vehicle makers are reducing their EV targets. This has further weakened the outlook for EV adoption in Northern America.

China’s booming EV market

The EV boom has continued in China, with the plug-in share rising from 13.9% in 2021 to 44.3% in 2024. The market’s strength is supported by favourable total cost of ownership and increasingly competitive pricing.

Given economic headwinds, the Chinese government has focused on boosting domestic consumption, with additional support directed toward state-owned OEMs. The economic situation appears positive, with the OECD upgrading the 2025 GDP growth outlook for China to 5%.

Vehicle demand also remains resilient. EV Volumes has slightly upgraded its 2025 light-vehicle sales forecast to 27.8 million units, up 7.1% year on year. A scrappage programme was extended beyond the original January 2025 deadline. However, it has been suspended in several cities, which could disproportionately reduce demand for EVs given their higher bonus levels.

Additionally, in October 2025, China ended its national EV subsidy programme, as reported by Reuters. It also excluded new-energy vehicles (NEVs) from the list of strategic emerging industries in its latest five-year development plan. This includes EVs, extended-range electric vehicles (EREVs) and fuel cell electric vehicles (FCEVs).

While direct subsidies are gone, purchase tax exemptions remain in place, although they are expected to phase out by 2027. Also, some local governments still offer targeted incentives.

Targets to hit

In 2025, China set a target of approximately 15.5 million total NEV sales. The country also pledged to reduce its greenhouse gas emissions by 7% to 10% by 2035. This marked the nation’s first commitment to absolute emissions cuts.

PHEVs have taken an increasing share of the EV market. This rose from 18.3% in 2021 to 42.3% in 2024 and was largely due to strong sales of BYD and Li Auto EREVs.

While Chinese OEMs continue launching new PHEVs and EREVs, BEVs are regaining momentum, bolstered by aggressive discounting initiated by BYD. As such, BEVs are forecast to account for 61.2% of EV sales in 2025 and about two-thirds by 2031.

In China, EVs are forecast to represent 56.4% of all light-vehicle sales in 2025. This is set to increase to 76.4% in 2030, 89.7% in 2035, and 96.1% in 2040.

Forecast volumes are based on retail sales (not wholesales), excluding exports and inventory build-up. This explains the difference from the typically higher wholesale-based figures published by other agencies.

Barriers in Northern America

In Northern America, including the US and Canada, light-vehicle sales rose by 2.9% in 2024, following 12.4% growth in 2023. The EV share increased from 9.4% in 2023 to 10.2% in 2024. In contrast to China, the region’s electrification looks to have lost a lot of energy.

Last year saw multiple major influencing factors hit the region’s light-vehicle market. Canada saw funding for the iZEV programme run out in January, with BEV uptake falling and no replacement scheme announced. In March, the US government announced 25% import duties on vehicles. Then the ‘One Big Beautiful Bill’ act ended EV tax credits in September.

Ford dropped plans for several all-electric models in the US and is replacing the all-electric F-150 Lightning with an EREV version. It was not alone, with Stellantis making similar strategic shifts, TechCrunch reported. This points to a greater share of PHEVs and EREVs as manufacturers balance electrification with customer preferences and profitability pressures.

EV Volumes has slightly increased the 2025 light-vehicle sales forecast for Northern America to 18.2 million units. This is up 2% year on year. The EV share is now expected to reach 9.9% in 2025 and rise only modestly to 10.1% in 2026.

These small gains will be primarily supported by Canada and the rollout of more affordable models. This includes the standard versions of the Tesla Model 3 and Model Y. EV shares are then expected to climb to 20.9% in 2030, 39.3% in 2035, and 58.6% in 2040. This is well below the predicted global EV share of over 83.2% in 2040.

European market uncertainty

Western and Central Europe’s light-vehicle market grew by 1.7% year-on-year in 2024, following 14% growth in registrations in 2023. Changing goods tariffs, developments in Ukraine, and ongoing tensions in the Middle East have all created regional sales uncertainty. The possibility of higher inflation, oil prices, and energy costs could also lead to weaker private consumption.

However, the OECD‘s December 2025 economic outlook predicts that GDP in the Euro area will gain 1.3% in 2025. This is slightly higher than the September outlook, which anticipated 1.2% growth.

The EU proposed tariff reductions in August, enabling the EU-US trade agreement. This lowered duties on the automotive sector from 27.5% to 15%. The recently ratified EU-Mercosur and EU-Mexico free-trade agreements have also boosted the region’s automotive competitiveness.

Low rate of growth

EV Volumes forecasts that light-vehicle sales in Western and Central Europe will grow by 0.3% year-on-year in 2025. This is higher than in the September 2025 forecast, which projected a 1% decline. At 15 million units, this is far below the 18 million light vehicles registered in 2019.

EV Volumes does not expect the European market to return to 2019 levels within the current forecast horizon, up to 2040. A slight dip in demand is also expected in 2030 and 2035. Demand will likely be pulled forward into 2029 and 2034, triggered by the stricter EU emissions targets.

Stagnation in 2040 reflects the underlying cycle effect. Earlier peaks in replacement demand and fleet renewals unwind, and the market normalises after several years of elevated recovery volumes. Light-vehicle sales are expected to grow by 1.7% in 2026, hinging on a complex interplay of regulatory and economic factors.

EV Volumes forecasts that European EV sales will grow 30.2% year on year in 2025 to 3.99 million units. This means they will represent 26.6% of all light-vehicle sales.

BEV volumes are forecast to grow 28% year-on-year, accounting for 67.5% of all EV deliveries in 2025. PHEV sales are expected to increase by 35.1%. EVs will reach a 31.1% share of European light-vehicle sales in 2026 and 36.6% in 2027. This will be driven by new model launches, lower prices, and stricter emissions targets.

EU Automotive Package

In December 2025, the European Commission unveiled its Automotive Package. It introduced a revised CO₂ reduction pathway and compliance mechanisms between 2030 and 2035.

Previously, carmakers had to cut tailpipe CO₂ emissions of passenger vehicles by 100% by 2035. Under the proposal, they will instead need to reach a 90% reduction compared with 2021 levels. The remaining 10% will be offset through low-carbon steel, e-fuels, and biofuels. So, PHEVs, EREVs, FHEVs, mild hybrids, and even pure internal-combustion vehicles (ICE) could remain available beyond 2035.

The package also suggests greater flexibility for the 2030 target. Manufacturers could get a three-year compliance period between 2030 and 2032 to achieve the 55% emissions reduction. For LCVs, the 2030 CO₂ reduction target would be eased from 50% to 40%, acknowledging slower electrification progress.

Additional proposed measures include mandatory zero and low-emission fleet share targets at the member-state level. There could also be updated labelling rules for EV range and energy consumption. ‘Super credits’ for small, affordable EVs produced in the EU are on the table too. A €1.8 billion battery support package is proposed to accelerate the European battery value chain as well.

The proposal remains subject to approval by both the EU Parliament and the EU Council. This means it is not reflected in EV Volumes forecast. However, if adopted as outlined, EVs may only account for between 55% and 60% of European light-vehicle sales by 2030. This would increase to between 80% and 85% by 2035. By 2040, this may hit between 90% and 95%.

These projections assume emissions balancing between 2030 and 2032 and continued alignment of national policies. Several markets, such as Norway, Sweden, and the Netherlands, are likely to maintain stricter targets. While currently committed to a 2030 ICE ban, the UK is expected to follow the EU’s revised framework.

Non-Triad measures

In non-Triad markets, EV volumes rose for the fourth consecutive year in 2024. This was thanks to greater product availability, stronger incentives, and lower import duties in selected countries. Combined EV sales reached 1.36 million units in 2024, up 34.2% year-on-year.

Light-vehicle sales managed the economic impact from US trade tariffs better than expected in 2025. However, EV Volumes has slightly decreased the 2025 light-vehicle sales growth forecast to 4.4%.

Indonesia introduced VAT exemption for low-emission vehicles in January and a reduced VAT rate thereafter. Japan increased the budget for EV subsidies under the Clean Vehicle Energy Subsidy Programme. India cut import duties for premium EVs as part of a new manufacturing programme in June.

Thailand revised its EV policy to encourage exports and prevent domestic oversupply. Each EV produced for export now counts as 1.5 units toward local production obligations.

In response to US tariffs, South Korea launched temporary stimulus measures. This includes financing support and higher EV subsidies. It is also planning additional tax exemptions for EVs. Accordingly, the EV share in non-Triad countries is forecast to reach 6.9% in 2025, hitting around 2.2 million units.

However, budget constraints driven by economic concerns may limit future incentive schemes. Several countries have introduced new tariffs on imported vehicles. This includes a 50% tariff in Mexico and up to 30% duties in Turkey. There will also be an end to incentives for imported, completely built-up BEVs in Indonesia.

The EV share is projected to reach 17% in 2030, 41.8% in 2035, and 76.8% in 2040. This generally lags the global adoption curve by about five years until 2035.