- The global new light vehicle market is forecast to drop marginally in 2026
- Sales of electric vehicles (EVs) are expected to increase year over year in 2026
- Demand varies dramatically in the U.S., Europe, and China
EV Volumes, part of JD Power, expects global new light vehicle sales to decline marginally year over year in 2026. Including passenger cars and light-commercial vehicles (LCVs) and across all powertrains, the market faces various headwinds.
These include a weaker economic outlook, ongoing trade friction, and geopolitical instability. Inflated oil and gas prices and increased uncertainty for energy‑importing economies risk higher energy prices and renewed inflationary pressure.
This could erode household purchasing power and impact manufacturers’ investments. So, how are electric vehicles (EVs) expected to fare?
The Road to Electrification
While the wider market is expected to decline, EVs look set to buck the overall trend. Combining battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), EVs are forecast to see 7.8% year-over-year growth in 2026. The pair’s share of the wider market, including all powertrains, is projected to rise 2.1 percentage points (pp) to 25.7%. This will be thanks to the sale of 23.3 million EVs.
Breaking down this year’s EV forecast further, BEVs are expected to see sales improve by 17.2%. This would translate to an 18.5% share of all light-vehicle sales. In contrast, a 10.6% decline in PHEV deliveries is projected, giving the technology a smaller market slice of 7.2%. This is with EV Volumes including extended-range electric vehicles (EREVs) in its PHEV figures.
As light vehicle sales are projected to return to growth in 2027, EV sales are expected to pick up speed. Plug-in vehicle deliveries should increase by 13.5% next year. This trend of double-digit improvement is forecast to continue in 2028 and 2029. By 2030, the global EV share is projected to surpass 40.0%, rising to 61.3% in 2035 and 81.0% in 2040.
However, new electric light-vehicle sales stagnated between January and May this year. A total of 7.5 million new models were delivered in this period, down 1.8% year over year. The tide may already be turning, however. May marked the third consecutive month of sales growth for EVs, following two declines in January and February.
Contrasting Forces
Many contrasting forces were at play behind this EV sales decline in the first five months of the year. For example, while PHEV deliveries plummeted 18.1% year over year between January and May, BEVs saw 6.7% growth. This meant the latter technology accounted for 71.4% of all EV sales worldwide.
The same disparity was also seen when looking at the different segments. Volumes of electric SUVs grew by 8.0% year over year between January and May. This increased their share of the overall EV market to 59.5%. B-segment SUVs experienced particular success, with sales soaring by 59.0%.
Deliveries of electric LCVs also soared in the first five months of 2026, up by 43.0%. Pickups also posted a strong 11.5% improvement. However, LCVs and pickups still held a relatively small slice of the EV market, at 4.4% and 1.0%, respectively.
Conversely, EV deliveries across all car segments dropped by 19.6% year over year, as their share decreased to 30.9%. This included a 58.5% slump for A-segment cars alone. The multi-purpose vehicle (MPV) category also suffered a decline, although this was much shallower at 2.6%.
The regions in which EVs were produced saw differing results, too. Sales of EVs produced in the Asia-Pacific region fell by 4.4% between January and May. Deliveries of EVs produced in Western and Central Europe rose 15.7%. Meanwhile, those made in North and South America fell by 20.7%.
U.S. EV Decline
Meanwhile, new EV sales declined by 32.9% in the U.S., the region’s biggest EV market. In the first five months of 2026, 415,968 new models were delivered, with BEVs representing 86.0% of this total. All-electric models endured a 24.0% sales decline, compared to a 61.1% slump for PHEVs.
The decline was also seen across almost every EV segment. SUVs, which made up nearly three-quarters of the country’s plug-in market between January and May, suffered a 33.8% year-over-year drop. Both C-segment SUVs and cars saw particularly steep sales declines, down 53.1% and 52.6%, respectively.
EV Volumes forecasts a 15.5% decline in EV sales year over year in 2026, reaching 1.3 million units. With a more subdued fall of 2.2% projected for overall light-vehicle sales, the EV market share is expected to drop to 8.2%. This is down from a 9.4% share in 2025 and is even 1.6pp behind the 2024 EV share.
Market Headwinds
These forecasts come as the U.S. light-vehicle market endures headwinds. Tariffs on vehicles brought into the U.S. remain in place. Although adjustments have been made for Canadian and Mexican-built models with U.S. parts.
“U.S.-assembled vehicles are also impacted by the import duty, with tariffs applying to non-U.S. components. However, a two-year import adjustment offset program has been implemented for manufacturers producing vehicles in the U.S.,” explained Neil King, head of forecasting at EV Volumes.
“Meanwhile, several planned PHEV and EREV launches in the U.S. have been delayed or cancelled. This points to a weaker‑than‑expected PHEV outlook as manufacturers reassess demand, cost competitiveness, and policy uncertainty,” he continued.
On the other hand, in California, $135 million has been allocated toward EV incentives. First-time EV buyers will be able to receive a $3,500 rebate for new models, according to the Los Angeles Times. To be eligible, a new EV must cost under $50,000 or be from a carmaker with headquarters in California.
In 2027, 15.6% year-over-year growth in new EV sales is expected across the U.S. In turn, the EV share is projected to rise to 9.3%. This is forecast to nearly double to 18.1% in 2030, reaching 36.8% in 2035 and 56.2% in 2040.
Canada’s Steady Progress
Canada’s EV market is also seeing policy and regulatory changes. The country recently shifted its EV strategy by lowering the 100.0% import tariff on Chinese‑made EVs to 6.0%. According to TD Economics, this lower rate applies to 49,000 vehicles per year. The threshold will increase to 70,000 over five years. It has also permitted up to 49,000 units to enter the market under a new bilateral arrangement.
“Additionally, the Electric Vehicle Affordability Program has been introduced. This is paired with stricter emissions standards that replace the former EV sales mandate. The tighter standards require automakers to meet progressively tighter fleet‑wide pollution limits,” said King.
Between January and May, EV sales in Canada grew by 5.3% year over year to 78,512 units. The BEV market accounted for 80.4% of these deliveries and recorded a 3.0% improvement in the same period. It was PHEVs which helped boost volumes, with a 16.2% surge in the first five months of the year.
The wider light-vehicle market is forecast to grow by 3.0% in 2026, with EV sales climbing by 40.2%. This would hand the powertrain pair a 13.1% share. However, this remains below the 13.7% peak recorded in 2024. This is predicted to be surpassed by a 24.1% share in 2030, rising to 42.5% in 2035 and 61.8% in 2040.
Europe Charges Ahead
Europe’s electrification curve is expected to be much steeper, as new EV sales continue to grow. In Western and Central Europe, sales improved by 29.7% in the first five months of 2026. A total of 1.9 million EVs made their way to customers.
Both BEVs and PHEVs pushed the market forward. The former saw a 30.7% year-over-year increase from January to May, while PHEVs posted a 27.7% rise. Europe’s five biggest new EV markets also saw double-digit growth. The standout performer was Italy, with an 82.6% surge.
The same positivity can be seen when breaking volumes down by segments. Broadly, all EV body types recorded growth across the first five months of 2026. B-segment SUVs enjoyed soaring demand, with sales up by 152.9%. This was also the case for A-segment cars, as deliveries jumped 197.3% year over year, although this was on smaller volumes.
Encouraging EV Uptake
Generally, Europe’s EV success so far this year has not come as a surprise. Various factors, including incentives, have helped encourage uptake.
Germany, Europe’s biggest EV market, has reintroduced substantial EV purchase subsidies. Spain is also set to support further uptake through its new Auto+ Program. The incentive launches under the Spain Auto 2030 plan.
“Chinese manufacturers are strengthening their footprint across Europe. They are proving particularly successful in price‑sensitive markets such as Poland and the Baltic states. Here, affordability and competitive specifications give them an edge over European rivals,” highlighted Joanna Fabiszewska-Solares, market analyst at EV Volumes.
Yet alongside these factors, wider headwinds threaten to dampen current growth. Although higher oil prices could support EV adoption, there are also concerns about the supply and price of natural gas. This may increase electricity costs and even jeopardize the stability of national electricity grids.
“Ultimately, this could weigh on overall light‑vehicle demand and EV uptake in 2026 and beyond. However, it is too early to determine whether it will also lead to longer‑term disruption across the automotive supply chain,” commented Fabiszewska-Solares.
EV Volumes forecasts that European EV sales will grow 23.0% year over year in 2026, with just under five million units. This would equate to a 32.2% market share. BEV volumes are forecast to grow 25.0%, accounting for 69.1% of this year’s EV deliveries. Meanwhile, PHEV sales are expected to increase by 18.7%.
In 2027, EVs are projected to capture 37.7% of the European light-vehicle market, increasing to 43.9% in 2028. This is expected to be driven by new model launches, lower prices, and stricter emissions targets.
Automotive Package Implications
The European Commission’s Automotive Package is also expected to impact EV sales in the coming years. If approved, it will introduce a revised CO2 reduction pathway and compliance mechanisms for the 2030 to 2035 period. EV Volumes anticipates its implementation.
Under the proposal, carmakers will need to cut tailpipe CO2 emissions of passenger cars by 90.0% from 2035, compared to 2021 levels. This is an easing from the previous target of 100.0%. The remaining 10.0% can be offset through low-carbon steel, e-fuels, or biofuels.
“This means PHEVs, EREVs, full-hybrids, mild-hybrids and internal-combustion engine vehicles could remain available beyond 2035, alongside BEVs and hydrogen fuel-cell vehicles,” noted King.
The package also suggests greater flexibility for the 2030 target. It would provide manufacturers with a three-year compliance period between 2030 and 2032 to achieve the 55.0% reduction versus 2021. For LCVs, the 2030 CO2 reduction target would be eased from 50.0% to 40.0%, acknowledging slower electrification progress.
Additional proposed measures include ‘super credits’ for small, affordable EVs produced in the EU. A €1.8 billion battery support package is also proposed to accelerate the European battery value chain.
Lower Light-Vehicle Demand
Alongside the Automotive Package, uncertainty persists about the impact of changing goods tariffs and current conflicts on European light-vehicle sales. EV Volumes assumes continued disruption to global trade flows.
“As LCV sales are already exhibiting signs of weakness, this suggests that passenger-car sales will follow suit later in 2026. Given this and persisting risks of higher inflation, oil prices, energy costs, and interest rates, EV Volumes has factored in lower demand in the second half of this year and into 2027,” said Fabiszewska-Solares.
EV Volumes forecasts that wider light-vehicle sales in Western and Central Europe will grow by 2.6% year over year in 2026. This is expected to increase by 1.1% in 2027, hinging on a complex interplay of regulatory and economic factors.
In 2030 and 2035, slight dips in demand are expected. Demand is likely to be pulled forward into 2029 and 2034, triggered by the stricter EU emissions targets.
“Additionally, the forecast reflects the underlying cycle effect, as earlier peaks in replacement demand and fleet renewals unwind and the market normalizes after elevated, post-COVID recovery volumes,” clarified Fabiszewska-Solares.
China’s Cooling Sales
While light-vehicle sales in Europe grow, deliveries in China are expected to fall. EV Volumes has downgraded its 2026 market-wide forecast to 25.3 million units, a 5.2% drop year over year. This would be the market’s first decline since 2022. The projection is the result of multiple factors.
“China has set a 2026 GDP growth target of 4.5% to 5.0%. This reflects policymakers’ shift toward a more cautious, quality‑focused growth approach. The change comes amid deflationary pressure, weak domestic demand, and structural headwinds,” outlined Fabiszewska-Solares.
“The country’s target also aligns with the June 2026 OECD Economic Outlook, which projects China’s GDP growth of 4.5% in 2026. However, recent data suggests that stimulus measures have been slower to gain traction than anticipated. Year‑to‑date light‑vehicle sales remain subdued, reflecting still‑weak consumer demand,” Fabiszewska-Solares said.
Deliveries Down
Subdued sales are also expected when looking at the EV market in isolation. EV Volumes expects sales to fall by 3.9% year over year in 2026, translating to a 51.6% market share. This would be a stark change from the EV market’s growth in recent years. Since 2020, it has recorded four years of double-digit increases and one year of triple-digit growth.
Between January and May, EV deliveries were down by 20.0% compared to the same period in 2025. While Chinese OEMs continue to launch new PHEVs and EREVs, BEVs are regaining momentum.
While all-electric models saw an 11.0% drop in the first five months of 2026, PHEVs felt a 34.5% slump. As such, BEVs are forecast to account for 70.2% of EV sales in 2026. This is predicted to rise to an 82.0% share in 2030. However, while the overall new EV market struggles to match its 2025 sales figures, some vehicle segments continue to grow.
Electric LCVs recorded a 44.2% improvement across January to May, while electric C-segment cars managed a 64.0% uptick in volumes. However, A-segment cars recorded a 70.4% decline.
Tougher EV Environment
It is important to note that the environment in which these EVs are competing has recently become much tougher.
In October 2025, China signaled the coming end of preferential EV policy support. According to Reuters, it excluded new energy vehicles from the strategic emerging industries list in its latest five-year development plan. This encompasses BEVs, PHEVs, EREVs, and fuel-cell electric vehicles (FCEVs).
“This marks a decisive turn towards a more mature, market‑driven environment. At the same time, China has introduced the mandatory EV efficiency standard and tightened national energy‑consumption rules. These are measures that set strict limits on electricity use and push lower‑performing vehicles and smaller players out of the market,” commented King.
“These policies are reinforced by new nationwide battery‑recycling rules that, alongside the fact that many local governments have begun phasing out car trade‑in subsidies, signal a shift towards a more market‑led, higher‑quality new-energy vehicle sector where weaker competitors struggle to keep up,” he noted.
EVs are forecast to represent 72.9% of China’s light-vehicle sales in 2030, 85.7% in 2035, and 91.9% in 2040. Forecast volumes are based on retail sales, not wholesale sales, excluding exports and inventory build-up.
Surging EV Markets
Amid challenges for the world’s biggest EV market, other countries in Asia have seen volumes soar. Deliveries surged by 110.6% year over year in South Korea between January and May. The world’s sixth-biggest EV market consists mainly of BEVs, which recorded a 123.5% increase. PHEVs made up just 2.9% of the EV total, as sales dropped by 28.9%.
The world’s eighth-largest EV market, Brazil, enjoyed a similar EV volume increase of 114.8% in the first five months of 2026. BEVs made up 54.3% of all light plug-in deliveries, recording sales growth of 181.4%. India also achieved a sharp rise in EV sales of 86.5%. BEVs effectively made up the entire new EV market.
Australian EV Market
Australia managed high plug-in sales growth between January and May, too. Deliveries jumped 99.5% year over year to 109,144 units, tail-ended by a 128.2% surge in May alone. BEVs represented 65.2% of EV sales, with volumes increasing by 106.5% over the first five months of the year. PHEVs saw a smaller improvement of 87.6%.
This growth was also recorded across the various vehicle segments. Electric SUVs gained significant demand, with volumes increasing by 126.7% year over year. The body type accounted for 78.0% of all EV sales between January and May. D-segment SUVs were the most popular electric segment in the country, followed by C-segment SUVs.
In comparison, B-segment SUVs held a much lower market share, although there was a sharp year-over-year surge of 892.3%. B-segment cars also posted a strong growth of 696.3%. This potentially signals an increasing desire for smaller EVs.
EV incentives may be helping to boost uptake in Australia. However, this is not in the form of direct purchase subsidies.
One of the main incentives available to EV buyers is the Fringe Benefits Tax (FBT) exemption on EVs. This can be acquired through salary packaging or novated leases, which removes FBT on the vehicle and its running costs. This includes registration, insurance, servicing and charging costs.
The exemption is only applicable to BEVs or FCEVs that are priced below the Luxury Car Tax threshold for fuel-efficient vehicles. Additionally, the vehicle must have been first held and used on or after July 1, 2022.
Author: Tom Hooker, content specialist at JD Power Europe & Australia. Proofing: Tom Geggus, media lead at JD Power Europe & Australia.