Road transport and electric vehicles (EVs) have been in the spotlight amid the current energy crisis. Road vehicles account for nearly half of global oil use, making the sector particularly exposed to fuel price spikes and supply disruptions. The sector is also a key driver of oil imports in import-dependent regions. Policy and industry responses to the energy crisis – especially those related to EVs – have the potential to further accelerate changes in a global car industry that is already in flux.

Electric car sales rebounded in the second quarter of 2026, even as global car sales declined. Sales of electric cars were 4% higher year-on-year (y-o-y) and 35% above the first quarter of 2026. As a result, electric car sales in the first half of 2026 were only slightly lower than in the first half of last year, as the increase in second quarter sales almost entirely offset the first-quarter decline. Meanwhile, global car sales were down by around 5% y-o-y in the first half of the year, primarily due to a drop in sales in the world’s two largest car markets – China and the United States. Overall, EVs accounted for 24% of global car sales, slightly higher than in the first half of 2025.

Electric car sales are now expected to reach 29% of total car sales worldwide in 2026. In Australia, Brazil, India, Korea and Viet Nam – all sizeable electric car markets – sales have roughly doubled since the beginning of the energy crisis, compared with the same period (March-June) in 2025. Together with strong second-quarter market momentum and policy support for EVs in Latin America, Southeast Asia and Europe, these trends support the expectation that electric car sales will grow around 10% this year, compared to 2025. The pace of recovery of the Chinese car market remains the main constraint on global sales growth. Electric car sales in the country are expected to reach similar levels as in 2025, though the EV sales share is expected to grow to more than 60% in 2026.

Surging car exports are partially shielding Chinese manufacturers from declining domestic sales. Total car sales in China declined over 20% y-o-y in the first half of 2026 with around 2.5 million fewer cars sold – equivalent to all cars sold in the United Kingdom and the Netherlands in 2025. In response, Chinese car exports grew by 65% y-o-y in the first half of the year, helping limit the decline in Chinese car production to around 6% y-o-y. Electric car exports grew even faster, increasing by over 120% and fully compensating for the decrease in domestic electric car sales. As a result, the share of electric cars in China’s car exports rose from around 35% in 2025 to more than 45% in the first half of 2026.

The rapid rise in Chinese EV exports is creating new market opportunities and uncertainties. Electric car exports from China have grown faster than overseas sales of those vehicles, with the gap widening more recently; over 1 million electric car exports from China over the last 18 months have not yet been registered as sales in other countries. While shipping times may explain some of this gap, the scale of the difference points to above-norm inventory build-ups in some destination markets. When these cars will be sold, and at what price, remains an important market uncertainty.

Competition is intensifying in the electric car market, where incumbent car manufacturers are less present. Carmakers operating primarily in the internal combustion engine (ICE) vehicle segment still account for around 98% of ICE car sales, but only around 55% of global electric car sales. Chinese carmakers have expanded rapidly both at home and abroad, including in emerging markets, where they hold a particularly high share of EV sales. With China and other emerging economies set to represent 60% of global car demand over the next decade, success in these markets will increasingly determine future market leadership.

supply chains and industrial structures. Value is shifting from traditional mechanical components towards batteries, electronics and software, with China occupying a leading position across much of the battery value chain. The rise of software-defined vehicles, pioneered by the EV industry, is also creating new sources of competitive advantage, while increasing pressure on incumbent manufacturers and suppliers to adapt. These shifts have significant implications for employment, supply chain resilience and industrial competitiveness.

China’s EV leadership reflects decades of industrial policy, innovation and scale. Chinese manufacturers benefit from integrated supply chains, strong battery capabilities and production costs that are around 35% lower than in advanced economies. Closing the competitiveness gap will require co-ordinated action by governments and industry, including stable demand signals, support for innovation, stronger battery ecosystems and improvements in manufacturing efficiency. Automakers are increasingly using joint ventures and strategic alliances to access technology, battery expertise, manufacturing capacity and new markets.