Impact of Tariffs on Electric Vehicle Market Forecast
30 April 2025
Tariffs on automotive imports into the US have shaken the industry, but how will electric vehicles (EVs) be affected? Neil King, head of forecasting at EV Volumes, sets out his expectations with Autovista24 editor Tom Geggus.
Since taking office in January, US President Donald Trump has imposed import tariffs on countries around the world. The subjects of these duties have been broad, with rates subject to change.
Most recently, Trump signed orders easing pressure on carmakers by introducing a mix of credits and relief from duties. Accordingly, these companies will be able to offset a portion of tariff costs on imported parts.
Until 30 April 2026, carmakers can claim 3.75% of the manufacturer’s suggested retail price on vehicles built in the US. From 1 May 2026 to 30 April 2027, this rate will drop to 2.5% and then be phased out.
Furthermore, carmakers will not be subjected to stacked tariffs, meaning no cumulative effects from multiple vehicle-related duties. Companies will instead be subject to the highest import rate. So, a carmaker would pay a component’s 25% import duty, but not on the part’s steel and aluminum as well.
How have all these tariff changes impacted global EV expectations? EV Volumes’ latest forecast highlights the impact on the global light-vehicle market, covering passenger cars and light-commercial vehicles.
Shake up for global forecasts
By the end of 2025, light-vehicle volumes are now expected to grow by 1.2% year on year. This is down from the 1.9% growth outlined in its March forecast. In volume terms, the reduction equates to 600,000 fewer units in 2025 and one million units in 2026.
The downgrade is due to the added economic uncertainty in the wake of the new US goods tariffs and a spiraling trade war with China. There is also the expected earlier withdrawal of the Inflation Reduction Act (IRA) in the US.
However, the global EV share forecast for 2025 has been increased to 23.6%, compared to 22.7% in the March update. An upgraded outlook in China compensated for the reduction in Northern America and adjustments in Europe and the non-Triad region.
EV sales are forecast to grow by 19.2% year-on-year, up from 16% predicted in March. The latest forecast of 21.32 million EV sales globally in 2025 is 700,000 units higher than EV Volumes predicted previously. EVs are forecast to account for 43% of global light-vehicle sales in 2030, rising to a 65.3% share in 2035, and 84.1% in 2040.
Uncertainty in Northern America
Light vehicle sales in Northern America, including the US and Canada, increased by 2.9% year on year in 2024. This followed 12.4% growth in 2023. The EV share rose to 10.3% in 2024, up from 9.4% in 2023.
On 26 March, the US announced a 25% import duty on vehicles. This did come with an adjustment for US parts in vehicles produced in Canada or Mexico. However, even US-built vehicles do not escape unscathed as a 25% tariff applies on the non-US parts.
However, OEMs cannot fully pass on these new tariffs through higher prices without incurring large sales declines. However, this has not happened in Europe since import duties were increased for EVs built in China.
According to J.D. Power analysis, the average price of new vehicles in the US is expected to increase by 5% by the end of 2025. This translates to an 8% reduction in the sales rate.
However, a ‘pre-tariff bump’ to sales is expected in the second quarter, a trend already recorded in March and April. Prices are then predicted to rise by between 3% and 5% on average in the third quarter. Then the ‘new normal’ of 5% higher prices is expected to take effect from the fourth quarter.
Alongside automotive and goods tariffs, EV Volumes has factored another upcoming hurdle into its forecast. It assumes the IRA, which provides EV tax credits, will be withdrawn in the second half of 2025.
Forecasts lowered
EV Volumes has lowered its 2025 light-vehicle sales forecast for Northern America to 17.67 million units. This equates to a 0.9% year-on-year decline. The long-term outlook has also been reduced due to the lower base.
The EV share of light-vehicle sales in Northern America is now predicted to reach 11.1% in 2025. This is down from the 12% forecast in March. In 2030, this is expected to reach 27.4%, growing to a 45.2% share in 2035, and then 64.1% in 2040.
BEVs are expected to account for 76.7% of EV sales in 2025. This share is projected to rise to 79.5% in 2026, then reaching 89.7% in 2030, 92.9% in 2035, and 94.2% in 2040.
Europe under pressure
Europe’s light-vehicle market grew by a modest 1.7% year-on-year in 2024. This followed the 14% registrations growth in 2023. There is uncertainty surrounding the new US goods tariffs and Europe’s response.
This is in addition to existing regional stresses such as the war in Ukraine. However, EV Volumes does assume a greater risk of rising inflation and energy costs. This may lead to higher interest rates and taxes across the region and downgraded gross-domestic product forecasts.
EV Volumes forecasts that light-vehicle sales in Europe, covering Western and Central regions, will grow by 0.15% this year.
The European automotive market is facing challenges as the latest forecast predicts slower growth than initially anticipated. With just under 15 million units projected for 2025, this falls significantly short of the 18 million light vehicles registered in Europe in 2019. The European market is not expected to return to pre-2020 levels by 2040.
EV deliveries in Europe declined by 2.2% in 2024, with a market share of 20.5%. This drop is attributed to changes in EV subsidies in countries like France, Germany, and Ireland. Incentives for PHEVs also decreased, leading to a downturn in EV sales. Even environmentally conscious nations like Norway ended VAT exemptions for EVs.
Legacy OEMs were able to meet CO2 limits without selling more EVs, resulting in a year-end push for ICE vehicles to avoid counting towards lower emissions targets. However, more affordable BEVs like the Citroen e-C3 are being introduced, and Chinese OEMs are expanding regionally.
Despite economic challenges, China’s EV market continues to grow, supported by a scrappage scheme and price competitiveness. State-owned OEMs are receiving significant government support amidst economic uncertainties. EV Volumes forecasts a 2.7% year-on-year growth in China’s light-vehicle market in 2025.
In non-Triad markets, EV demand is rising due to increased product availability, incentives, and lower import duties. EV sales grew by 32.6% in 2024, reaching a 4.4% market share. However, economic uncertainties and new US tariffs have led to a lowered growth forecast for 2025.
The forecast for non-Triad countries predicts a 5.85% EV market share in 2025, with continued growth expected in the coming years. South Korea and Japan are offering support for PHEVs and hydrogen fuel-cell vehicles, but incentives may be at risk in an economic downturn.
Overall, EV adoption is expected to increase globally, with EVs projected to account for 52.6% of light-vehicle sales in China by 2025 and 76.7% in non-Triad markets by 2040. Developing countries may need to develop their own EV industries to catch up with more mature markets. With the rise of social media and digital platforms, the way we consume news and information has drastically changed. Gone are the days when people would wait for the morning newspaper or the evening news broadcast to get updates on current events. Now, news is available at our fingertips 24/7, with real-time updates and live streams becoming the norm.
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