2025 Will Be Huge For EVs Unless Tariffs Crash The Party

Analysts expect EV growth to hit 30% in 2025, but with shifting geopolitical tides, the next five years could be much darker.

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Rob Stumpf

By: Rob Stumpf

Jan 2, 2025 at 2:00pm ET

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2025 is shaping up to be a crucial year for EV growth worldwide
Growth could be stymied by geopolitical shifts in the near future
These changes, including anticipated protectionist tariffs, could ripple across the industry

While you were cheering the ball drop on New Year's Eve, investors were cheering on the EV industry, making them gobs of cash in 2025. Sales are expected to jump by double-digits this year—analysts at S&P Global Mobility expect global BEV sales to jump 30% year-over-year, which accounts for around 15.1 million units worldwide. In market share terms, that's around 16.7% of the light-duty vehicle market, which is starting to sound pretty darn impressive.

In fact, this surge could be a critical milestone in global EV adoption. But, like all things, it's not that simple. These predictions are hinging on perfect market conditions. As mentioned above, there are a number of geopolitical unknowns lining up for 2025 which could send analysts' forecasts spiraling off course.

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Let's start with the bright side of things: EV makers are more prepared than ever to start cranking out cars at volume. More batteries, more models, more experience. And at the forefront of that is (unsurprisingly) China with a solid government-backed strategy that has helped it quickly become the undisputed king of the industry.

Most major markets are expected to experience double-digit gains in its EV market share. China, as a seasoned player, is predicted to experience an uptick of 19.7%, whereas India, one of the smaller markets, is anticipated to get a whopping 117% percent increase in EV market share for 2025 as the Indian government pushes for cleaner vehicles and more affordable SUV-shaped models debut in the region.

Global EV market growth for 2025 as predicted by S&P Global Mobility

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Outside of China's well-oiled EV machine is a world that's grinding its gears a bit. Sure, things are looking great for 2025, but that's just a small snapshot of what's really happening. Long-term predictions are a bit rocky, at best—and the world has political policy precariousness to thank for that.

Here's what S&P Global Mobility predicts:

Through 2024, a host of OEMs have been walking back ambitious electrification plans for the coming five to 15 years. A key concern is how "natural" EV demand fares, as governments fine-tune policy support, especially incentives and subsidies, EV industrial policy, and tariffs. Outside China, automakers face twin challenges in the electrification transition—scaling output of sellable BEVs and finding willing customers to buy them.

The real uncertainty, according to S&P, starts beyond 2025. As policy changes set in, new tariffs promised by the Trump administration are expected to send rippling effects across the globe. S&P predicts that countries will take retaliatory measures and global trade will ultimately slow considerably.

These changes could pose problems in the second half of the decade and beyond. With a wider net of tariffs catching imported goods to the U.S., a market that may not respond well to government incentives being ripped away, and protectionist tariffs preventing EV prices from falling naturally, the unknowns paint a very murky picture of what the industry looks like over the next 15 years.

Here's more from S&P on some of the more diplomatic risks for 2025 and beyond:

The production outlook for 2025 is dominated by the assumption that the incoming US administration will levy a new wide-reaching tariff regime, effectively creating a universal tariff of 10% on all goods coming into the US except for Canada and Mexico where the terms of the USMCA are assumed and mainland China where it is assumed a tariff of 30% will be applied.

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For the North American region, overall 2025 production is set to fall back by 2.4%, to 15.1 million units. The incoming Trump administration will mark a return to the predictably unpredictable with policies that are expected to influence overall demand and challenge vehicle mix assumptions. On a brighter note, deregulation should create tailwinds for the North American auto industry later in President Trump's second term.

Europe is expected to build 16.6 million units in 2025, down 2.6% from an estimated 17.0 million in 2024. The outlook reflects propulsion mix fine tuning ready for the 2025 step change in EU emissions rules, alongside new tariff/trade assumptions associated with the incoming Trump administration, with premium vehicles particularly at risk.

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The uncertainties are weighing on the scales of growth—on one hand, the market is approaching a tipping point where natural growth seems inevitable. Consumers are buying EVs, and they're doing so because battery-powered cars are becoming more affordable and charging networks are now more accessible, in part thanks to subsidies.

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On the other are pressing concerns that could push the market back towards combustion-powered cars that are already more affordable thanks to scale and government-backed incentives in non-automotive industries that spill over to fuel (think subsidies that link the farming industry and ethanol). Automakers are already welcoming back hybrids to their fleets despite them being viewed as a stop-gap between full-combustion powertrains and battery-electric. If regulations are loosened, could the industry see even more backtracking?

Whether or not the industry continues to expand rapidly beyond its anticipated 2025 increase is really up in the air, or as S&P puts it: "predictably unpredictable."

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