Two Fundamental Changes In The Global Car Industry In 2026

North America Leaves The EV Field & The Europeans and Japanese Hand The EV Ball To China

As I have covered previously, the global car industry is the most critical manufacturing industry in the world as it uniquely combines mass production with product complexity, placing it at the leading edge of large scale manufacturing techniques and technologies. It affects supplier industries from steel production, to robotics, to microchips, to software. The future of this industry is electric vehicles, driven by the still relatively new technologies such electric batteries, electric motors, advanced driver assistance systems (ADAS), and vehicles sensors. Unlike the ICEV technologies which are extremely mature, much more cost efficiency and performance can be wrung out of the EV technologies. With especially battery costs still rapidly falling as new technologies such as sodium-ion and solid-state technologies become increasingly utilized. And of course, they reduce local air pollution and climate change emissions. Electric vehicle production is a fundamental core of the manufacturing future, and therefore one would expect Europe, the US, Japan and South Korea to be laser focused on making sure that they have a major presence in it. But that does not seem to be the case:

North America Leaves The Field

Into 2024, it looked as if the United States was at last getting serious about electric vehicles with even GM, Ford and Stellantis significantly investing in electric models; even electric trucks. Also, with Tesla as the global leader in the sale of battery electric vehicles (BEVs). Aided by the Biden administration manufacturing subsidies, sales incentives, and tradable ZEV credits. And then came the Trump administration.

At the end of Q3 2025, all that was swept away. GM, Ford and Stellantis slashed their EV plans and took writeoffs, and even the Ford F-150 Lightning BEV was killed off. US sales of EVs crashed in Q4 2025 post-incentives, a major hit to Tesla that makes the vast majority of its profits in the US. With affordable EVs from China walled off behind a 100% tariff “Berlin Wall” in both the US and Canada. The latter also ended its own EV incentives, at both the Federal and Quebec level (Ontario had ended them in 2018), and Mexico raised its tariffs on Chinese cars from 15-20% to 50% at the start of 2026. And of course, there were also the new tariffs on European, Japanese and South Korean imported cars.

The North American car market willbe walled off from the EV future, akin to the fortified border between East and West Germany during the Cold War. On one side the future delivered at highly competitive prices, like the VWs, BMWs and Mercedes that East Germans lusted after. On the other side the past delivered by a highly oligopolized industry adept at price gauging, like the Trabants of East Germany. In my latest update on the North American car market, I contrast a North American offering with the alternatives from China. I reproduce it below, the gap between North America and the rest of the world that has access to EVs sold within a highly competitive market place will only widen by the year.

Here is the “black label” version of the Lincoln Navigator ICEV for a cool US$120,000. With lots of plastic and a very annoying user interface, “borderline dangerous”.

Compare that to the Chinese Zeekr 9X EREV large SUV, with the top-end model selling for the equivalent of US$84,000. The Chinese car actually has many of the physical controls that the Navigator lacks. The 9X does 0-100km/h in 3.1 seconds vs. the 5.3 seconds for the Navigator and has a much more advanced ADAS and entertainment system. The 9X is a more luxurious and better designed and equipped car, in a different league to the Lincoln Navigator; for two thirds the price.

More on par with the Lincoln Navigator, and still significantly more luxurious and better equipped, is the Onvo L90; priced between US$38,000 and US$42,000 (from US$25,000 if you take the battery rental option). The top-end version has a 0-100km/h of 4.7 seconds, and the L90 also has a much more advanced ADAS and entertainment system. In comparison, the Navigator looks like some used vehicle from the 2010s.

Europe & Japan Hand The Ball To China

VW has decided on an “In China, For China” strategy, which really means that the group’s electric vehicles sold in China will be designed and manufactured by Chinese automobile manufactures. In the case of the VW brand, SAIC, JAC, FAW and Xpeng with cars utilizing the China Main Platform and the China Electronic Archirecture (utilizing the Xpeng architecture). Sales of VW’s European designed “ID” cars have utterly collapsed in China, so to compete VW is doing little more than having Chinese-designed cars constructed from Chinese parts by Chinese car companies.

• The new VW ID. Era 9X EREV SUV will use a gasoline engine developed by SAIC, electric motors from SAIC, batteries from CATL and Zenergy, software from Xpeng, and will be built by the SAIC joint venture.

• The VW ID. Unyx 06 released in April 2026 (an upgrade of a 2024 model) uses more German design and technology and has very low sales. The up coming ID. Unyx 08 BEV SUV, developed with Xpeng using the Xpeng architecture and based upon the Xpeng G9 platform, will use the Xpeng ADAS, entertainment and connectivity software while being built by JAC with CATL batteries.

• VW also plans to produce cars under the ID. Aura marque, designed with Xpeng, using Xpeng architecture and software, and built by FAW with CATL batteries.

VW will have a very full range of electric cars in China, which to all intents and purposes will be Chinese cars with a VW badge on them. VW has moved all decision making for these cars to China, and plans to increasingly export cars from China; excluding Europe (for now?).

In the case of Audi, a whole new AUDI brand has been created to sell cars designed and built by SAIC. The first model, the AUDI E5 Sportback, has been outselling all of the Audi BEVs; but that is not a high bar to exceed with sales of only 6,000 in the first eleven months of 2025. Built by SAIC utilizing the SAIC IM L6 platform, with SAIC electric motors, a SAIC developed digital platform, and CATL batteries.

Audi will still produce the “four rings” Audi cars for the Chinese market, with its partner FAW. This will include an upcoming A6L e-tron BEV, an electric version of the Audi A6L only for the Chinese market, which will use the Premium Platform Electric (PPE) platform developed with Porsche, and CATL batteries. In August 2025, Audi released the China-only Q6L e-tron and Q6L Sportback e-tron BEVs based on the PPE platform. Between August and November, the two models sold less than 3,000 vehicles; with the Sportback selling only 300.

The Porsche brand does not manufacture cars in China, and is utterly uncompetitive; quite possibly on its way to an exit from the Chinese market. Its Chinese sales peaked at 95,671 in 2021, fell to 56,887 in 2024, and were only 32,195 in the first three quarters of 2025; down 26% y-o-y. The Xiaomi SU7 (launched in March 2024) and Xiaomi YU7 (launched in June 2025) BEVs compete directly with Porsche models, offering much better functionality, a higher level of luxury and twice the warranty length at much lower prices. The Macan BEV below starts at RMB 578,000 (US$81,700) in China, while the SU7 starts at RMB 253,500 (US$35,000). The highest spec Xiaomi YU7 Max is one third of the price of the price of the highest spec Macan Turbo.

Xiaomi plans to start exporting its vehicles to Europe in 2027, the core sales market of Porsche. The North American market will still be protected, but focused on ICEV rather then EV vehicles. Porsche is now working on a new ICEV mid-sized SUV to sell beside the BEV-only Macan.

The Mercedes and BMW brands have so far stuck to using a global EV car platform. Except for the highest-end vehicles (7-Series and S-Class, GLS and X7) their Chinese sales are produced by their joint ventures (BMW Brilliance and Beijing Benz); with Chinese batteries, Chinese motors, Chinese sensors, and even Chinese ADAS (Momenta for both brands). The vast majority of both brands’ sales in China are of the heavily discounted ICEV models, as their BEV and PHEV sales are very low, with overall sales of BMW falling while Mercedes sales are in more of a free fall (down over 20% in 2025). The latter’s China sales have fallen from a peak of 775,000 in 2020 to just above 500,000; the former’s from a peak of 846,000 vehicles in 2021 to about 620,000 in 2025.

Toyota’s bZ3X BEV, launched in early 2025, utilized BYD’s batteries and EV technology, together with the Momenta ADAS, and is manufactured at the joint venture GAC Toyota; sales in China were about 70,000 in 2025. The bZ4X BEV model, launched in 2022, based upon the e-TNGA platform jointly developed with Subaru and manufactured in China (GAC Toyota) and Japan has trivial sales in China. The bZ5 BEV, also built on the e-TNGA platform, co-designed and manufactured by FAW-Toyota with BYD batteries and Momenta ADAS, was launched in China mid-2025; sales are about 2,000 per month. All of the “bZ” cars have been extremely well priced, but only the bZ3X is selling in any volume and is only manufactured in China (as is the bZ5); the bZ4X is primarily produced in Japan.

In September, Toyota announced the bZ7 BEV sedan, with the electric drive system from Huawei, the battery from CALB, the ADAS from Momenta, the infotainment system from Huawei, ecosystem integration from Xiaomi, and designed and manufactured by GAC Toyota. To all intents and purposes this is a Chinese car. This has been developed specifically for China, but will it stay in China? Toyota plans to open a new wholly-owned Lexus EV factory in China in 2027, but one has to question whether it will even be relevant by then. In 2021, the company had planned 30 new global electric vehicle models by 2030; the majority of them may in fact be made by Chinese manufacturers with Chinese designs, architectures and components.

Nissan simply went the whole hog and badged a slightly changed Dongfeng branded car as a Nissan, built at its joint venture Dongfeng-Nissan; the Nissan N7 BEV; selling about 50,000 since its launch in April 2025. In December, Nissan announced the N6 PHEV which is both developed and manufactured by Dongfeng-Nissan. The Honda P7 and S7 are produced by GAC-Honda and Dongfeng-Honda respectively, marketed solely in China; with Honda’s e-platform, Huawei’s ADAS and batteries from CATL. Sales of both models have been desultory.

The Mazda EZ-6 BEV sedan is a slightly altered version of the Deepal S03, and the EZ-60 BEV/PHEV SUV is a slightly altered Changan Deepal S07, manufactured by the joint venture Changan-Mazda. The EZ-6 is already sold in Europe, and will be rolled out to Australia in 2026. The EZ-60 is planned to have a global rollout in 2026. The EZ-6 sells a couple of thousand a month in China, the EZ-60 about 3,500. Changan has become the global base for the design, development and production of Mazda-branded EVs. Below the EZ-60, sold as the CX-6e in Europe; for twice the price in China.

The only time that German and Japanese brand BEVs seem to sell well at all in China is when they are to all intents and purposes not German and Japanese, but rather Chinese BEVs with a German or Japanese brand badge on them. This says much for the many years that these groups wasted not properly developing their own EV technology. With North America turning away from EVs (and the EV share of the Japanese market nearly trivial), and EV sales in Europe only a third of those in China with European nations and the EU authorities lessening their commitments to EVs, the German and Japanese manufacturers are faced with the choice of either a huge uphill struggle to try to catch the Chinese eco-systems capabilities or a progressive surrender to that eco-system. They are choosing the latter.

China & South Korea The Last Ones Standing?

The South Korean Hyundai Group (Hyundai, Kia and Genesis) have maintained their own BEV production with a dedicated e-GMP platform upon which the (Hyundai) Inster, Kona and Ioniq, (Kia) Niro, EV6, EV9, (Genesis) GV60, GV70 and GV90 models are based. The “China-specific” Hyundai EO with Huawei ADAS, BYD batteries (not South Korean), only built by the Beijing Hyundai Chinese joint venture, also uses the e-GMP platform. It has already been released in Australia. The sister Kia EV5 is also manufactured by Beijing Hyundai, but vehicles for the South Korea home market and Europe and Canada are manufactured in South Korea. Non-Chinese models use CATL batteries and Hyundai ADAS.

Of the group’s 7.5 million sales in 2024, over 2 million were in North America, 1.4 million were in South Korea, 1.2 million in Europe, 850,000 were in India, 500,000 in MENA, 370,000 in Latin America and 250,000 in China (the vast majority being Hyundai cars). Of those global sales, just over 400,000 were BEVs; less than 3.5% of its sales are in China, and those China sales are falling. The majority of Hyundai Group BEVs are sold in Europe, and with the tiny sales footprint in China and the collapse in US BEV sales, Europe will become an even more dominant source of BEV sales.

With the leading Chinese manufacturers having huge BEV sales in comparison (BYD 2.26 million, SAIC GM-Wuling a million, and Geely over 900,000), with even Changan, Chery, Leapmotor, HIMA, Xpeng, Xiaomi exceeding Hyundai Group’s BEV sales. With all of them predominantly focused on BEVs, utilizing the huge and super-competitive Chinese EV eco-system. The accelerating growth in Chinese BEV sales in Europe could significantly impact those of the Hyundai Group, further reducing the BEV share of the group’s global sales. Leaving the field open to the Chinese, with the destruction of European-produced BEV sales in Europe by the likes of VW only limited by the Chinese Party-State’s need to manage the bilateral trade relationship with Europe and the speed that Chinese manufacturers can build plants in places like Hungary, Turkey, Spain and Algeria. With even Xiaomi and HIMA most probably exporting to Europe in 2027.

The share of the Chinese market taken by electric vehicles in December 2025 was nearly 60%, with BEVs taking 38%, after a slowdown in the previous torrid growth of electric vehicles; significantly due to foreign ICEV manufacturer price slashing, heavy discounting and the “car scrapping” subsidies that included ICEV purchases. Those subsidies have been renewed for 2026, and BMW, VW and Buick have already started the New Year with new price cuts and incentives, but the EV technologies will continue to deliver falling costs and increasing performance which will increasingly make ICEVs utterly uncompetitive. Even with slower growth, the market share of EVs went from 53% in December 2024 to 59% in December 2025; a one seventh reduction in the ICEV share. A move to 70% in 2025 would reduce the ICEV share by a quarter. The island upon which Chinese ICEV sales reside is shrinking every year, and not even the ICEV leaders of VW and Toyota will be able to maintain sales levels, while they and the Americans hand the BEV sector to the Chinese.

The global dominance of the Chinese EV industrial eco-system is underlined by the dominance of the Chinese EV battery manufacturers in the global market, especially CATL and BYD. The former had a 38.2% share of the global EV battery market in the first eleven months of 2025, the latter a 16.7% share; a combined 54.9%. The South Korean LG Energy Solution has been consistently losing market share, now 9.3%. The #4 and #5 are the Chinese CALB (4.9%) and Gotion High-tech (4.3%), followed by the South Korean SK On (3.9%) and the Japanese Panasonic (3.7%). Below that it is all Chinese manufacturers. In the Chinese market which represents the majority of sales and the leading edge of the EV battery business, LG Energy Solutions is the only non-Chinese battery producer present with only a 2.58% market share. This is due to its second place in the supply of the older technology ternary batteries, with no presence in the newer and dominant LFP segment. The EV battery market is driving innovations in battery technology that then spread to other segments such as domestic and grid-scale energy storage, as with sodium-ion batteries.

The global EV business is destined to dominate the global automobile business, and affect a myriad of centrally important segments of global manufacturing and related service sectors. North America has given up on EV’s, Europe and Japan are incrementally surrendering to the Chinese EV eco-system, and South Korea is a bit player in the global EV business. The geopolitical impacts of this will be profound, as the West falls further and further behind in absolutely critical areas of manufacturing and high technology services. With North America the worst off behind its EV tariff “Berlin Wall”.