14 July 2025
US tariff uncertainty remains, conflicts continue, and economic headwinds prevail. These are just some of the factors affecting global light-vehicle sales outlooks. But how will they impact electric vehicle (EV) figures? Neil King, head of forecasting at EV Volumes, reviews his projections with Autovista24 journalist Tom Hooker.
The global light-vehicle market, made up of passenger cars and light-commercial vehicles (LCV), is forecast to improve by a modest 1.1% in 2025. EV Volumes expects over 90.15 million units to be registered this year.
This is down from its previous 1.2% growth prediction made in an interim report in April. The figure is also a 0.7 percentage point (pp) drop from its March forecast. This equates to a loss of around 40,000 units from April’s report.
This is due to continued subdued order intake in Europe, caused by high interest rates and elevated living costs.
The downturn also takes into account US automotive tariffs, which were announced in March, as well as ongoing uncertainty surrounding broader trade duties since April, growing instability in the Middle East, and the continued Russia-Ukraine conflict.
Global EV growth continues
Meanwhile, Global EV deliveries, which combine battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), are forecast to rise by 19.8% in 2025 to 21.29 million units. This represents an increasingly positive outlook, with a 19.2% improvement forecasted in April.
However, this improvement would still be below 2024’s 25.3% increase. This was, however, with a lower total volume of 17.78 million EVs registered.
This year’s double-digit global EV growth is expected to come despite some governments phasing out purchase incentives and tax breaks amid mounting national debt, particularly in Europe. Non-Triad markets and robust PHEV demand in Europe have held up the forecast, offsetting downgrades in China and North America.
While EVs took a 19.9% share of the global light-vehicle market in 2024, the powertrain grouping is predicted to capture 23.6% of overall sales this year. This figure is stable from April’s forecast.
BEVs are expected to take a 65.1% share of the light vehicle EV market in 2025, with a year-on-year delivery improvement of 22.9%. PHEVs are forecast to see slower growth of 14.3% giving them a 34.9% share.
This is a drop from the 36.6% PHEV share in 2024, when the powertrain outpaced BEVs in terms of growth. The former enjoyed a 55.1% surge in volumes compared to BEVs’ 12.8% improvement.
Longer-term forecasts
Looking further forward, the global EV share is forecast to reach 26.4% in 2026, before improving to 42.2% in 2030, reaching 64.2% in 2035, and 83.1% in 2040. However, budget pressures and policy shifts may threaten investment in incentives and charging infrastructure, which could impact the outlook.
The global volume of EVs is set to rise from 21.29 million units in 2025 to 40.15 million registrations in 2030. A total of 64.02 million deliveries are expected in 2035, increasing to 86.7 million units in 2040. This figure is almost five times the number of EV sales recorded in 2024.
Annual traction battery demand is forecast to increase from just under 0.87 TWh in 2024 to around 5.77 TWh in 2040. The latter is nearly seven times the actual annual demand seen last year.
EV Volumes also forecasts that global battery demand for light vehicles will surpass 1TWh in 2025.
This is driven by the quest for longer electric ranges in all vehicle segments. Yet, the trend for larger batteries is slowing as they gain in efficiency. Furthermore, lower costs facilitate the electrification of smaller vehicles, where profit margins are tighter.
The number of EVs in operation is increasing rapidly. However, their share of the overall light-vehicle fleet is developing with a considerable delay.
There are 1.33 billion light vehicles on the road today, with plug-ins accounting for just 4.1% of this total. EV Volumes predicts it will take until 2043 for more than half of the global fleet to be electric. This is calculated using their current forecast for EV growth, which assumes normal scrappage rates.
Europe set for decline?
In Western and Central Europe, EV Volumes expects that light-vehicle sales will decline by 0.3% year-on-year in 2025. This is lower than their interim April 2025 forecast, which projected a 0.1% increase. It is also a significant drop from the predicted growth of just under 0.7% in their March forecast.
A total of 14.91 million light vehicles are expected to take to European roads in 2025, a 0.3% decline compared to 2024. This is slightly down from April’s forecast of 14.99 million units and still well below the 18.04 million light vehicles registered in 2019.
This downward revision comes as uncertainty persists regarding the impact of changing goods tariffs, developments in Ukraine, and escalating tensions in the Middle East. EV Volumes also assumes a growing risk of rising inflation, oil prices, and energy costs, which will lead to weaker private consumption across the region.
Furthermore, the OECD’s June 2025 economic outlook predicts that GDP in the Euro area will grow by only 1% in 2025.
Due to weaker goods exports to the USA and a struggling services sector, EV Volumes sees registrations of LCVs already being affected by trade frictions and tariffs. Passenger-car sales are expected to follow suit.
European regulatory and economic factors
Moreover, EV Volumes does not expect the European market to return to its 2019 volume level within the current forecast horizon, which stretches to 2040. In 2026, a 1.9% growth in European light-vehicle sales is projected. This hinges on a complex combination of regulatory and economic factors.
Meeting the required lower CO2 emissions targets and circularity requirements mandated by the European Commission will necessitate a major increase in EV sales. This could trigger a price war, supported by lower lithium costs. OEMs may also restrict the supply of internal combustion engine (ICE) vehicles to avoid costly emissions fines.
On a positive note, Italy has announced €597 million in funding for a scrappage scheme, as reported by Il Sore 24 Ore. Meanwhile, Germany is considering the reintroduction of BEV incentives in 2025, after subsidies stopped at the end of 2023. However, the implementation of new subsidies may be delayed due to economic conditions.
Furthermore, more affordable BEVs are expected to enter Europe. Leading Chinese OEMs like BYD are also expanding in the region.
On the other side of the EV market, PHEV registrations are exceeding expectations. This additional volume is driven by the eased CO2 targets, expanded PHEV offerings from both European and Chinese players, and delayed launches of low-cost BEVs.
Additionally, the UK’s ban on new petrol and diesel models from 2030 still allows all hybrid types to be sold until 2035.
Altered European EV forecast?
As a result of these factors, EV Volumes expects that European electric light-vehicle sales will grow by 22.8% year-on-year in 2025 to 3.77 million units. This is a notable increase from April’s forecast of 3.51 million registrations, translating to a year-on-year rise of 14.3%.
EVs are predicted to represent 25.3% of total light-vehicle sales this year, up from a 20.5% share in 2024. In the previous forecast, the increase was projected to be 23.4%.
Broken down, BEV volumes are forecast to grow by 20.6% year-on-year and account for 67.4% of the 2025 EV mix. Meanwhile, PHEV sales are expected to increase by 27.7%.
Driven by new model launches, lower prices, and stricter emissions targets, EV Volumes forecasts that EVs will reach a 29.2% share of European light-vehicle sales in 2026. Then, BEVs and PHEVs are expected to account for more than one in three registrations in 2027.
The EV share is then projected to rise to 62.9% in 2030, reaching 93.5% in 2035, and 99.4% in 2040. The forecast for 2035 and beyond includes some tolerance for timing interpretations of the ICE sales ban and allows for exemptions for vehicles that may be considered unsuitable for full electrification.
China boosts domestic production
Considering the current economic headwinds, China’s government has focused on boosting domestic automotive consumption. Additional support has been directed toward state-owned OEMs.
However, trade friction with the US has added uncertainty, and China’s economic growth in 2025 is expected to fall short of the 5% target.
The country’s scrappage scheme, which offers higher trade-in bonuses for EVs than for petrol vehicles, has supported the market’s strength alongside a favourable cost of ownership and increasingly competitive pricing.
After launching in April 2024, the program has been extended beyond the original January 2025 deadline, as reported by the International Council on Clean Transportation. However, it has been suspended in several cities, which could disproportionately reduce demand for EVs given their higher bonus levels, electrive reported.
A stable outlook?
Taking all these factors into account, EV Volumes maintained its 2025 Chinese light-vehicle market forecast of 26.7 million units, an improvement of 2.7% year-on-year.
EVs are forecast to represent 51.4% of all light-vehicle sales this year, up 7.1pp from its 2024 market share. This is then projected to increase to 72.8% in 2030, before growing to 88.3% in 2035, and 95.5% in 2040.
Chinese OEMs continue launching new PHEVs and extended-range electric vehicles (EREVs). Yet, BEVs are regaining momentum, bolstered by aggressive discounting initiated by BYD. As such, BEVs are forecast to account for 61.5% of EV sales in 2025 after reaching a 57.7% share of the EV market in 2024. This share will then grow to two thirds by 2030.
Forecast volumes in China are based on retail sales, not wholesales. This excludes exports and inventory build-up, which explains the differences from the typically higher wholesale-based figures published by other agencies.
Tariffs impact Northern America
The Northern American automotive market, which includes the US and Canada, is impacted by the 25% tariffs imposed by the US on imported vehicles.
To reduce the impact, there are adjustments for US parts content in Canadian and Mexican-built models, but even vehicles assembled in the US do not escape unscathed. This is because the tariffs still apply to non-US components.
Average new car prices in the US are expected to increase by 5% by the end of 2025, which in turn could reduce sales by 8%, according to J.D. Power representatives.
On a more positive note, a reimbursement scheme was implemented by the US government at the end of April, which offers OEMs tariff relief over two years. Carmakers assembling vehicles in the US can receive a credit worth up to 3.75% of the vehicle’s manufacturer’s suggested retail price. This then drops to 2.5% in year two.
So far, prices have largely held steady. However, discounting has weakened and an increase in vehicle demand referred to as the “pre-tariff bump” had already subsided by June.
Meanwhile, a Republican-backed Senate bill will see EV tax credits of up to $7,500 (€6,420) disappear by 30 September. This has led to carmakers urging buyers to take delivery of a new model by the deadline, according to Reuters. Any resulting pull-forward effect in 2025 is likely to be offset by weaker demand due to higher vehicle prices.
In Canada, funding for the iZEV programme ran out in January 2025, with BEV uptake falling and no replacement scheme announced.
Revising downward
Considering these developments, EV Volumes lowered its 2025 light-vehicle sales forecast for Northern America to 17.66 million units, a decline of 1% year on year. This would be a weak performance for the market after its 2.9% growth in 2024.
The long-term outlook has also been revised downward, by around 29,000 sales in 2026 and 65,000 units in 2027.
The combined BEV and PHEV share is now expected to fall from 10.2% in 2024 to 9.9% this year. In 2026, the EV market hold is projected to rise modestly to 11.1%. This is expected to be primarily supported by a more affordable Tesla model.
The EV share is then forecast to climb to 22.5% in 2030 and 41% in 2035. BEVs are PHEVs are predicted to make up 60.3% of the overall Northern American market in 2040, some distance below the expected global EV share of over 80%.
Non-triad outlook improves
In non-Triad markets, light-vehicle sales are expected to increase by 1.8% in 2025 to 30.88 million units.
This was an upward revision of 0.1pp from April, when the weaker global economic outlook, especially considering US trade tariffs, led EV Volumes to downgrade its growth projections. However, June’s forecast is still below the 2.3% improvement projected in the March forecast.
The EV share in non-Triad countries is forecast to reach 6.6% in 2025. This would be ahead of the 5.9% market hold projected in April’s outlook, and the 4.5% share recorded last year. Total electric light-vehicle sales are predicted to reach 2.03 million units this year, around 234,000 deliveries higher than the previous forecast.
This total would translate to an EV sales growth of 49.5% year on year, even higher than the 34.2% increase recorded in 2024. BEVs are forecast to see volumes rise by 43% in 2025, while PHEVs are projected to enjoy an even greater increase of 72.9%. In turn, the BEV share of the EV light-vehicle market is expected to drop from 78.5% to 75.2%.
EV subsidies implemented
Several factors may have influenced this upward revision and projection of strong growth. Firstly, Japan increased the budget for EV subsidies under the Clean Vehicle Energy Subsidy Programme in early 2025. Elsewhere, India cut import duties for premium EVs as part of a new manufacturing programme in June 2025, as written by Business Standard.
Indonesia introduced a VAT exemption for low-emission vehicles in January 2025 and a reduced VAT rate thereafter. Finally, in response to US tariffs, South Korea launched temporary stimulus measures, including financing support and higher EV subsidies, Reuters reported.
However, budget constraints driven by higher defence spending and macroeconomic concerns may limit future incentive schemes. The non-Triad EV share is projected to reach 16.8% in 2030, then 41.6% in 2035, and 76.7% in 2040. This means the region’s EV market generally lags the global adoption curve by about five years.
