How is EV Market according to recent estimates? EV sales recorded a lacklustre performance in 2024 but are poised to recover within 2026: in Europe, their growth is expected to be driven by fleet operators and leasing contracts. Passenger cars will still hold the largest share; commercial vehicles are gaining ground
Based in London, New York and Singapore, BMI is a Fitch Solutions Company that recently staged an online event whose leitmotiv and title was “Will EV sales rebound in 2025”? In fact, figures suggest that demand has been weakening between 2023 and 2024 across all major markets: Asia-Pacific, North America and Europe, the latter of which experienced the most significant slowdown. As BMI analysts pointed out, emerging markets – Kazakhstan in first place, followed by Chile, Brazil, Russia – are forecasted to mark the most interesting growth rates at the end of this year, whereas the developed markets, despite a higher GDP per-capita, are not expected to post any remarkable improvement over the next few months. As EVs falter both in the EU and the US, hybrids and mild hybrids especially, together with traditional petrol-fuelled ICE’s, are surging. Over the first seven months of this year sales of mild hybrid models climbed to nearly two million units (1,6 over the same period of 2023); plug-in hybrids and BEV’s displayed no meaningful change: PHEV purchases were around 500,000 units; those of battery electric vehicles were around 800,000.
Drivers and hurdles
BMI experts underlined that the EV industry has proven attractive for investments, in terms of development capacity, since 2022 at least, and quoted the key factors influencing the set-up of dedicated plants over recent years. Of course, government incentives, the will to support domestic manufacturers – plus the relevant supply chain, workforce and infrastructure – and some near and back-shoring strategies have been playing a crucial role in supporting the EV industry’s development. On the other hand, car makers and investors must now deal with a slowdown which is necessarily going to affect and limit their further expansion projects across the main EV markets. Critical raw materials represent a major issue and BMI noticed that such countries and regions as Australia, Canada, the US and Europe are all striving to implement measures aimed to boost their respective production and mining capacity; and therefore their independence and competitiveness.
The Chinese syndrome
At the same time, Western economies are aware that China is the rival they must face, and that the People’s Republic’s car industry is, no matter the trade barriers put in place in order to confront its expansion, extending its presence overseas. One way or another. As, for instance, Europe, has risen the duty tariffs on China-made EVs, up to 45%, BYD (the acronym stands for Build your Dream) is planning to open new facilities in Turkey and Hungary, whereas Chery is allegedly working to a new plant in Spain, where it will produce cars under the Omoda brand. Furthermore, Leapmotor signed a partnership agreement with Stellantis, with the goal to develop its engines in Tychy, Poland. Spain and Poland are also eyed, respectively, by Geely, that already owns the Volvo and Polestar labels, and Saic; Xpeng and Nio are reportedly showing interest in operating at the EU borders. If we take a look at the opposite shore of the Atlantic Ocean, BYD and GAC are establishing plants in Brazil and the first is scouting suitable locations in Mexico too; Chery seems to have found its promised land in Argentina, where it should be able to source its batteries locally.
The trouble with legacy OEMs
Traditional parts and car suppliers – legacy OEMs – are now dealing in the Western world with a number of criticalities and incognita, both from a regulatory and technological point of view. Rising demand for mild hybrids is driven by superior price-value proposition and challenges with EVs regarding range, charging, and elevated prices. Meanwhile, winners of the 2024 European election round are pushing to overturn the ICE phase-out date, and the EU commission is presumed to review the ICE ban date in 2026. As BMI observed, original equipment manufacturers are today struggling to meet ambitious climate (and environmental sustainability) goals, given the fact that the European Union’s Green Deal urges carmakers to reduce emissions by 15% in 2025. The alternative is to face penalties. This is one of the reasons why producers are lobbying and aiming to achieve a delay on the phase-out plan while at the same time mitigating or reducing the relevant benchmarks. Conscious that ICEs and (mild) hybrids are leading the green transition and therefore the automotive market, OEMs are striving to stay flexible so to respond to potential regulatory changes.
What’s next?
BMI’s view is that, albeit slowly, EV sales and volumes are poised to expand over the next decade although forecasts indicate that non-EV models will still represent more than 60% of the overall market. At the same time observers predict that both e-fuels (made up of captured carbon dioxide or carbon monoxide, together with hydrogen obtained from water split) and biofuels will attract growing attention; and the uptake of mild-hybrid motors is also to be taken into account. As said, the performance of EV sales is quite likely to be affected by politics, over the 2024-2026 period at least. Joint ventures between Western and Chinese players have good chances to boost trades as well, whereas OEM strategy shifts and EV delays will weigh on medium-term EV sales growth. Passenger car sales will still hold the largest market share and experience globally a robust +10.1% increase in 2026, following a +20.7% high this year and a slowdown (+3.3%) in 2025. But commercial vehicles display the most impressive growth rates: +62.5; +29.7; +39.5% respectively in 2024, 2025 and 2026. Especially in Europe, fleet operators and leasing contracts are expected to be the major market drivers; in North America it could be the Inflation Reduction Act – aka: IRA – to support a wider adoption of electric cars. In general, government subsidies and emission policies are likely to influence market dynamics and of course, the possible removal of EV Incentives and subsidies is among the most worrisome risk factors for the industry. As for growth opportunities, the decarbonisation of the supply chain could prove profitable for makers, together with the research and investments on e-fuels and plug-in hybrids and with the consolidating commercial EV segment.
by Roberto Carminati
