EV outlook 2026: crisis to catalyst

EV outlook 2026: crisis to catalyst

The recent ‘EV outlook 2026: crisis to catalyst’ report paints a picture of rising global EV penetration despite a turbulent geopolitical backdrop. Markets 360 believes the convergence of geopolitical tensions, policy stimulus, and technological progress creates a paradoxical environment for the electric vehicle sector. On one hand, the oil shock acts as a catalyst, spurring demand and encouraging governments to double down on decarbonisation agendas from an energy security perspective. The team thinks the transition to EVs can help reduce dependence on crude oil and fuel imports, thereby improving importers’ supply security. On the other hand, surging battery metal prices and rising aluminum costs add pressure to manufacturers’ cost structures in the near term.

Oil shock accelerates the global EV shift

With no clear end to the Middle East conflict, and the continued closure of the Strait of Hormuz, through which a fifth of oil and LNG is transported, EVs’ popularity is rising. As higher fuel prices directly increase the cost of owning internal-combustion-engine vehicles, a prolonged disruption could further support global EV sales. However, Markets 360 also sees risks of the conflict resulting in a global standstill in auto purchases as higher energy prices dent economic growth.

Policy boost

The team expects the conflict to accelerate the global policy push for EV adoption, as countries seek to reduce dependence on volatile oil markets, though policy responses are diverging across key markets. Global EV penetration is likely to keep rising, led by robust momentum in Europe, underpinned by reinstated subsidies in major markets, a broader range of affordable models and a rush for manufacturers to meet CO2 emission targets.

In contrast, the team sees downside risks to absolute EV volumes in both the US and China, where policy changes have hit the EV market. China’s current high-level policy targets play a more limited role in guiding the EV sector than in earlier stages. The government has not updated its long-term targets for EVs, and subsidies and incentives that supported sales in the past are being gradually scaled back.

The US has taken a step back in supporting the EV industry, with demand-side support in particular weakening sharply. Some automakers have scaled back EV plans and adjusted their US product strategies in response to the evolving regulatory landscape.

Battery technology advances

Markets 360 continues to expect lithium-iron-phosphate batteries to dominate the market. Technological advances have narrowed LFPs’ energy-density gap with ternary batteries and rising cobalt costs make their cobalt-free cathodes more attractive and cost-effective. The team foresees limited near-term passthrough from the surge in battery metal prices, as Chinese EV manufacturers’ vertical integration and cathode production overcapacity is likely to help absorb higher costs.

Sodium-ion batteries are gaining momentum as a cheaper and more cold-resistant alternative to lithium-ion batteries, though LFP and ternary batteries remain superior in terms of energy density for long-range EVs. Simultaneously, solid-state batteries are emerging as a crucial advance in battery development. Though they offer benefits over liquid-electrolyte batteries in terms of lifespan, flammability and temperature range, their commercialisation remains challenging, as they are more expensive and much larger.
The team expects innovative breakthroughs in sodium-ion and solid-state batteries to lead to wider deployment after 2030.

Industrial metal prices surge amid supply concern

Shortages due to production losses in the Middle East are pushing up aluminium prices and input costs for the auto sector. Markets 360 expects the market to face deficits, relying on higher prices and demand destruction to balance supply and demand. Concerns over refined nickel output have driven up prices, but the team expects the impact on the EV market to be muted by the growing use of LFP over ternary technology.

Innovation drives differentiation

Amid tougher competition, companies aim to win market share through technology commercialisation and product differentiation.

Charging infrastructure: The year of V2G

Global EV charging infrastructure continues to scale rapidly, with public chargers reaching 6.7 million in 2025 (+28% y/y). While growth is beginning to normalise on base effects, Markets 360 believes the absolute pace of deployment remains robust.
Advances in fast-charging are narrowing the gap with conventional refuelling, with leading EV makers expanding proprietary ultra-fast charging networks.
EV makers and utilities are investigating vehicle-to-grid (V2G) technology, which enables EVs to feed extra electricity back into the power grid, to support power system flexibility and renewables integration.

Autonomous driving: From hype to deployment

Autonomous driving is gaining momentum from advances in AI and shifts to in-house capabilities, though standardisation and cost reduction remain challenging.
Whereas in the past automakers primarily used third-party solutions, leading EV players are now integrating self-developed models into the core architecture of their systems. This strategic shift towards in-house capabilities enables greater control over key technologies and creating more defensive competitive advantages.

Acceleration of automation is being driven by rapid advances in AI, particularly vision-language-action models. Leading players are moving from traditional high-definition map-dependent systems towards more scalable, camera-based approaches trained on large datasets. This shift reduces the reliance on costly, city-by-city HD mapping and the numbers of Light Detection and Ranging (LiDAR) sensors needed on vehicles, significantly shortening deployment timelines – potentially, from years to months.

Regulation is beginning to catch up with technological progress. The team thinks the proposed UN Global Technical Regulation on Autonomous Driving Systems should help harmonise standards and support cross-border deployment over time, though regional divergences may remain.

FAQ

How are global EV sales 2026 expected to respond to the ongoing Middle‑East conflict? Rising oil and fuel prices make internal‑combustion cars more expensive, nudging consumers toward EVs and bolstering global EV sales 2026. However, if energy inflation drags overall economic growth, the net lift could be partially offset.

How is autonomous driving technology influencing the EV market outlook 2026? AI‑driven vision‑language‑action models let manufacturers replace costly HD‑maps and LiDAR‑heavy stacks with camera‑centric stacks, shortening deployment cycles from years to months. In‑house AI stacks give EV makers a defensive edge and accelerate deployment.

What is the status of charging infrastructure and V2G in the 2026 outlook? Public chargers climbed to 6.7 million in 2025 (+28 % YoY) and fast‑charging networks are narrowing the gap with conventional refuelling. EV makers and utilities are piloting vehicle‑to‑grid (V2G) systems to add flexibility to power grids and support higher renewable penetration.

BNP Paribas does not consider this content to be “Research” as defined under the MiFID II unbundling rules. If you are subject to inducement and unbundling rules, you should consider making your own assessment as to the characterisation of this content. Legal notice for marketing documents, referencing to whom this communication is directed.