All this doom and gloom about the state of the electric vehicle market? This is just an American problem. The rest of the world can’t get enough EVs, according to a new exhibition by the International Energy Agency.
EV sales exceeded 20 million units last year, capturing 25% of the global market. Growth was highest in China, and market share in other regions has also accelerated. In Latin America, for example, sales increased by 75%. Meanwhile, US sales are stagnant, with EVs hovering around 10% market share.
The EV market has become K-shaped, and automakers of all stripes – legacy and startup – should pay attention.
U.S. sales figures were held back last year by the One Big Beautiful Bill, which killed EV tax credits, along with policies that prevented Chinese automakers from entering the market.
For startups like Rivian and Lucid, which have invested heavily in the US market, it certainly creates a tougher road ahead. Legacy automakers are somewhat isolated as they can rely on more profitable fossil fuel vehicles — at least in the short term. But without a solid EV strategy, they stand to lose more global market share as consumer tastes and expectations change.
Elsewhere, Chinese automakers are driving the top of the K higher. The growth was most evident in China, where nearly 55% of new vehicles were electric. Affordability helps: More than two-thirds of electric vehicles sold in the country were cheaper than the average fossil fuel car.
Chinese automakers also contributed to increased EV sales in Southeast Asia, Latin America and Europe. More than half of the electric vehicles sold in Southeast Asia were made by a Chinese company, for example, while Europe imported more than half a million Chinese electric vehicles.
The phenomenal growth of electric vehicles in Southeast Asia and Latin America is taking a hit a prevailing theory that electric cars would be too expensive for developing economies. EV prices have been on par with internal combustion vehicles for the past two years in Thailand. “Imports of affordable electric cars from China have reduced prices and boosted EV sales in many emerging markets in recent years,” the IEA report said.
That might not last forever, though.
Chinese automakers exported more than 25% more vehicles than were bought in foreign markets. Dealers outside of China may resist accepting more EVs until they can sell what they have on hand. In addition, countries may begin to stress with the flood of cheap Chinese cars and tariffs.
Even if that happens, it would be foolish to count out Chinese brands. The Communist Party has invested significant sums to turn its auto industry into a powerhouse. As a result, the country has enough production capacity to fulfill 65% of global demand. Thanks to government support, Chinese automakers could produce large numbers of vehicles far more than other companies can sustain.
In the long run, however, EVs promise to undercut fossil fuel vehicles, even without subsidies. As early as next year, battery electric vehicles will be cheaper to do than internal combustion vehicles, according to Gartner.
The Trump administration is trying to steer the U.S. market back toward fossil fuels, perhaps convinced that the domestic market is different from others, but it is pushing into stiff headwinds. The fossil fuel passenger and light truck market peaked in 2017according to BloombergNEF, and while sales of hybrids and plug-in hybrids are growing, they are not growing as fast as pure EVs.
Perhaps the most cautionary tale comes not from an American automaker, but from a Japanese one.
Honda, which recently killed three electric vehicle projects, has jeopardized its future as a global carmaker. By pulling back on electric vehicles, it will forgo critical lessons that have helped companies like Tesla and BYD lower the cost of their vehicles. And because EVs are ideal platforms for building software-defined vehicles, Honda is missing out on another industry-sweeping trend that has also helped companies cut costs.
Overall, it paints a bleak picture for legacy automakers that have retreated from EV ambitions.
Companies that don’t get their respective EV houses in order could lose out to competitors in the global market, sacrificing revenue that could keep them competitive for years to come.
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