Whalesbook
February EV Market Sees Sharp Global Decline Amid Policy Shifts
February 2026 marked a significant shift in the global electric vehicle market, moving away from rapid growth towards a tougher, price-sensitive period. As established markets grapple with changed incentives and consumers watching costs closely, competition is changing fast. Chinese carmakers are increasingly focused on exports, prompting traditional automakers to rethink their strategies.
Policy Shifts Cause Major Market Drops
Global EV registrations fell 11% year-over-year in February, totaling just over one million units. This marks the lowest volume since February 2024 and is largely due to government policy changes. China, the world's largest EV market, experienced a 32% year-on-year registration drop, its most significant contraction since the start of the COVID-19 pandemic. This follows the end of a broad purchase tax exemption at the close of 2025 and reduced trade-in subsidies, impacting buyer affordability.
North America's EV market also contracted, falling 35% – its fifth consecutive monthly decline. This slump is directly tied to the cessation of U.S. federal EV tax credits in September 2025 and proposed regulatory shifts.
Europe Grows While Exports Surge
Despite the overall decline, Europe emerged as a key growth area, with EV sales up 21%. This resilience is supported by ongoing regulatory mandates and renewed subsidy programs in countries like Germany and Spain.
Beyond these major markets, the 'rest of the world' saw an impressive 78% surge in EV registrations. This growth was fueled by targeted incentives and the expanding reach of Chinese manufacturers into new regions. Facing domestic overcapacity and intense price competition at home, Chinese automakers are aggressively leveraging their export capabilities.
China's EV exports jumped 87% year-over-year in November 2025, establishing it as a major global export hub. Mexico has become a significant gateway into North America, benefiting from more favorable trade policies. This export drive helps Chinese companies manage domestic market pressures and offset falling profit margins.
Automakers Face Pressure Amid Market Changes
The EV market's current trajectory is highly sensitive to shifting government policies, leading to inherent instability. The sharp contractions in China and North America clearly show how quickly demand can cool when incentives are withdrawn.
Legacy automakers with significant investments in these regions are facing severe consequences. Companies such as Ford, General Motors, and Stellantis have collectively reported over $70 billion in EV-related writedowns as they adjust their electrification plans, with some reconsidering hybrid vehicle offerings.
The surge in exports from China brings increased competition and potential trade friction. New regulations requiring export licenses for Chinese EVs, effective January 2026, aim to control this influx but could create market access challenges.
With China's domestic market potentially halving its sales growth rate in 2026, export markets are likely to face intensified competition and price pressure. The current reliance on subsidies and ongoing price wars are unlikely to be sustainable long-term, potentially leading to further consolidation and financial difficulties for less competitive players.
2026 Forecasts Predict Slower Growth
Analysts expect global EV sales growth to moderate in 2026. Forecasts suggest an approximate 15.7% increase to 23.9 million units, a notable slowdown compared to previous years. China's domestic market growth is also predicted to slow, potentially halving its rate.
Europe is forecast to remain a strong performer, with EV sales expected to reach 5.15 million units, a 29% year-over-year increase.
The expanding global footprint of Chinese automakers, particularly in emerging markets and through new production bases, will continue to reshape the competitive landscape. Legacy carmakers face immense pressure to adapt their product lineups and cost structures to compete with lower-priced Chinese vehicles and the possibility of increased trade barriers.