Battery electric vehicles (EVs)

State of the art (2026)

Electric car sales are growing at different speeds in different markets. The International Energy Agency's 2026 outlook reports strong growth early in the year across several regions and expects sales to keep rising. In Europe, the Commission proposed in December 2025 to lower the 2035 target for cutting CO2 from new cars from 100% to 90%. EU environment ministers discussed the proposal in March 2026, and a European Parliament committee voted on it in November 2026. It has not yet been adopted, so the 100% target remains the law. Prices, local production and policy all affect which car makers do well in each market. We do not have 2025 sales totals by maker that we trust.

The China cost advantage is structural, not cyclical

Chinese EV manufacturers have built a vertically integrated supply chain that produces battery electric vehicles at $12-15K — roughly half the cost of comparable Western models. This advantage stems from three reinforcing factors: domestic control of battery materials and cell manufacturing (CATL, BYD supply 60%+ of global EV batteries), massive government subsidies that funded a decade of learning-curve acceleration, and a brutally competitive domestic market (over 100 EV brands) that drives relentless cost optimization. BYD’s Seagull retails for $10K in China with positive margins. No Western OEM has demonstrated the ability to produce a profitable EV below $25K. This cost gap is widening, not closing, because Chinese manufacturers are now achieving scale economies that further reduce per-unit costs while Western OEMs are still ramping production lines at a loss.

Legacy automaker transition economics are worse than consensus expects

The world’s largest automakers — Volkswagen, Toyota, GM, Ford, Stellantis, BMW, Mercedes — are collectively spending over $300B on electrification through 2030. The fundamental problem: every BEV unit they sell currently loses money while cannibalizing profitable ICE sales. Ford’s Model e division lost $4.7B in 2023 on 116K units — over $40K per vehicle. VW’s Trinity project has been delayed repeatedly. The transition creates a doom loop: invest too slowly and lose market share to Chinese competitors; invest too aggressively and destroy profitability. Most legacy OEMs are choosing a middle path that satisfies neither imperative. The restructuring wave has begun — Stellantis CEO departure, VW factory closure threats, Ford EV pullback — but the full financial reckoning is still ahead.

Trade barriers create protected but inefficient second ecosystems

The US (100% tariff on Chinese EVs), EU (provisional tariffs of 17-38%), and other markets are erecting trade barriers to protect domestic manufacturers. This will slow Chinese market capture but cannot eliminate the underlying cost advantage. The historical parallel is Japanese automakers in the 1970s-80s: voluntary export restraints and tariffs delayed but ultimately could not prevent Japanese dominance. The tariff approach creates two distinct EV markets — a competitive, low-cost Chinese ecosystem and a protected, higher-cost Western ecosystem. The critical question is whether protection buys enough time for Western manufacturers to close the cost gap, or whether it simply entrenches inefficiency.