Global EV market diverges as US growth stalls

The global electric vehicle market is experiencing a K-shaped divergence. According to a report from the International Energy Agency, global EV sales surpassed 20 million units last year, capturing 25% of the global market. However, this growth is highly uneven. While adoption accelerates in other regions, sales in the US remain stagnant, with electric vehicles hovering around 10% market share. This divergence presents a challenging road ahead for US-based EV startups like Rivian and Lucid, which face market challenges in their primary domestic market.

In contrast, Chinese manufacturing is driving the upper leg of this divergence. Growth was highest in China, where nearly 55% of new vehicles were electric. Backed by significant industrial scaling, China now possesses enough manufacturing capacity to fulfill 65% of global demand. This capacity has allowed Chinese automakers to export affordable models to emerging markets, challenging the assumption that electric vehicles are too expensive for developing economies. For instance, EV sales in Latin America grew by 75% last year, while Southeast Asian markets like Thailand also saw increased adoption. As the International Energy Agency report noted, “Imports of affordable electric cars from China have brought down prices and driven up EV sales in many emerging markets in recent years,”.

This transition is occurring against a broader structural decline in traditional automotive markets. According to BloombergNEF, the global market for fossil fuel passenger vehicles and light trucks peaked in 2017. The cost dynamics are also shifting: the research firm Gartner projects that battery electric vehicles will be cheaper to make than internal combustion vehicles—defined as traditional gas-powered vehicles—as early as next year.

Despite these shifts, some legacy automakers are pulling back on their electric vehicle plans. Honda, for example, recently canceled three EV projects. By retreating, legacy brands risk losing global market share to competitors like Tesla and BYD. They also miss out on crucial cost-cutting lessons and the structural advantages of software-defined vehicles—defined as vehicles whose features and functions are primarily enabled through software.

Why it matters

The global EV market is splitting into a K-shaped recovery, with US stagnation contrasting against rapid growth elsewhere; legacy automakers that fail to adapt their EV strategies risk losing significant global market share.