This deceleration is particularly evident in the U.S and the Europe, two key EV markets after China. Affordability, pricing, lack of charging and other supporting infrastructure , increased competition, continue to slow demand. As a result, automakers have scaled back their short-term electrification plans, delaying production and cutting costs.

Despite these challenges, global EV adoption is progressing. One in five new cars sold worldwide is now electric, according to BloombergNEF (BNEF), a figure projected to reach one in three by 2027 and one in two by 2032.

The EV market is concentrated, with China, Europe, and the US accounting for more than 90% of sales, according to research published by the IEA. While sales in  China grew by 37% year-over-year in 2024, it was a different picture for the other two geographies.

In Europe, key markets like Germany, France and Italy have had weaker growth. Germany, the continent’s largest auto market, saw sales contract in the first three quarters of 2024 compared with the same period in 2023. The removal of government subsidies, particularly in Germany and France, has played a significant role in this downturn.

In the US, EV sales growth fell from 50% in 2023 to 8% in 2024. Political uncertainty has further complicated the market, with shifting policies affecting EV incentives and charging infrastructure development. Meanwhile, Tesla, which has dominated the American EV market for years, recorded its first annual sales decline in over a decade due to increased competition and a lack of new models.

Elsewhere, Japan and India collectively account for approximately 11% of global passenger vehicle sales, but EV adoption remains at just 3-4%. With continued government incentives and infrastructure improvements, EV penetration in these regions is expected to rise.

Year on year growth in EV sales

There are multiple factors behind this:

1. Affordability and pricing: On average, EVs remain 30% more expensive than internal combustion engine (ICE) cars in Europe and 27% more expensive in the US. Many consumers are unwilling to pay this premium.
2. Charging infrastructure: Lack of widespread and reliable charging networks in most regions, deter those consumers with range anxiety.
3. Subsidy cuts: Government incentives helped early EV adoption, but withdrawal of subsidies has softened demand.
4. Protectionist policies and tariffs: Uncertainty around tariffs on raw materials increase production costs, adding to the challenges faced by automakers, and increased price premium with respect to ICE cars if additional cost is passed on to consumers.
5. Consumer behaviour: Plug-in hybrid vehicles (PHEVs) are increasingly seen as a bridge between ICE and EVs. In China, PHEVs accounted for 45% of EV sales in 2024, up from 20% in 2021.

Naturally, automakers are responding to these challenges. Tesla, for instance, removed its goal of selling 20 million EVs annually by 2030 and is now focusing on affordability, aiming to launch lower-cost models in 2025. And Volkswagen cut EV production and abandoned plans for a new EV plant in Germany, while increasing its investment in battery supply chains and upping its BEV sales targets.

The cost of batteries account for nearly one-third of an EV’s price, and their affordability has increased in recent years due to higher  production capacity, technological innovation, and falling metal prices.

According to research by BNEF, the average price of lithium-ion battery packs fell by 20% year-over-year to $115 per kilowatt-hour (kWh) in 2024 – the largest decline since 2017. In China, this figure fell below $100 for the first time, a key milestone for achieving price parity with ICE cars. The firm estimates pack prices to fall to an average of $91 by 2026 and $70 by 2030.

Average lithium-ion battery pack price (volume-weighted, all sectors, adjusted to real 2024 dollars)

Despite the slowdown, consumer interest in EVs remains high. According to a survey by TCS nearly two-thirds of respondents are inclined to purchase an EV as their next vehicle, and is a desire most pronounced in those under the age of 35.

However, “ownership” might not be the right way to measure the progress of the transition, especially in times to come. Shared mobility, which includes services like ridesharing, car-sharing and vehicle subscription are increasingly gaining traction not only because of affordability and convenience, but also because of their positive environmental and societal impact.

Looking ahead, the U.S. market faces uncertainty under Trump’s presidency, with potential rollback of EV incentives and stricter tariffs on imports already making a lot of headlines.

In Europe, the lack of new subsidies and emissions regulations (though 2025 emission targets are expected to be relaxed) will continue to impact consumers and automakers respectively, in the near future

However, there are reasons for optimism in the long-term growth and transitioning of the sector:

• Europe’s competitiveness plan has proposed a €150bn investment in clean transport, including charging infrastructure.
• Japan has upgraded its EV subsidies and committed $2.bn in 2024 to EV battery production.
• India increased its budget allocation for EV initiatives, focusing on manufacturing, charging networks, and battery swapping.

While EV sales growth experience near-term challenges, the long-term outlook of the market is fairly upbeat. Advances in battery technology, increasing government investments and commitment towards transitioning, and growing consumer interest will continue to drive the transition to electric mobility.

Follow us on social media and visit our Insights website for more on the big trends shaping the global business landscape.