Contrary to popular belief, EV sales growth continued to accelerate in 2025

Global electric vehicle sales reached a record 20.7 million in 2025, up 20% year-over-year (+3.6 million units, larger than 2024’s +3.5m), driven by China (12.9m, +17%), Europe (4.3m, +33%) and Rest of World (1.7m, +48%) while North America fell 4% to 1.8m. The report highlights accelerating EV adoption alongside a ~25% decline in internal combustion vehicle sales since the 2017 peak, notes Western automakers cutting EV production plans amid regulatory rollbacks (U.S. EPA, Europe) and lobbying, and underscores China’s export-led push — implying continued upside for EV and battery supply chains and strategic risk for incumbents reverting to gas vehicles.

Analysis

Market structure: 2025’s 20.7m EVs (+20% YoY; China 12.9m, Europe 4.3m, NA 1.8m) confirms accelerating unit demand and a geographic shift toward China. Winners: vertically integrated Chinese OEMs and battery/materials producers who gain pricing power via scale; losers: Western OEMs, some US charging infra and legacy parts suppliers facing slower NA volumes. Expect downward pricing pressure on finished EVs but sustained upward demand for battery metals and semiconductors.

Risk assessment: key tail risks are policy reversals (US/Europe subsidies, export controls), commodity shocks (nickel/lithium supply interruptions), and manufacturing setbacks; low-probability high-impact scenarios include broad US protectionism or China export restrictions. Immediate (days–weeks) risk is Q4 delivery volatility and incentive cliff effects; short-term (3–12 months) is production plan rebalancing; long-term (3–7 years) is structural share shift to Chinese OEMs. Hidden dependencies include recyclers, grid capacity, and battery chemistry transitions.

Trade implications: tilt long battery-materials and Chinese OEM exposure, short select Western OEM equities and US charging infra names that rely on rapid domestic EV growth. Cross-asset: expect widening credit spreads for US auto debt if sales remain depressed and modest CNY strength on export strength; copper/lithium demand stay supportive for commodity prices. Use options to size asymmetry around delivery/incentive windows.

Contrarian angles: consensus that “EV growth slowed” is wrong — unit growth is accelerating but regionally uneven; market may underprice a multi-year disadvantage for Western OEMs (think Nokia v. smartphones). Risks of overbuilding mining capacity and battery gigafactories create a 12–24 month mean-reversion risk in commodity prices; that is a potential tactical short in miners if capacity announcements spike.

Key Decisions for Investors

• Establish a 2–3% long position in BYD (OTC: BYDDF) or HK-listed 1211.HK — thesis: Chinese OEM unit leadership and margin resilience; time horizon 6–18 months, target +25–40% upside if exports and scale persist.
• Build a 3–4% combined long in lithium/battery material producers: ALB (Albemarle) 2% + LAC (Lithium Americas) 1% + SQM 1% (or equivalents). Hold 6–18 months; add on < -20% pullback. Cut if spodumene/lithium carbonate prices fall >30 sustained for 2 months.
• Initiate a relative-value pair: long BYDDF (1.5% portfolio) vs short Ford (F) or GM (GM) (1% notional) — expect 6–12 month outperformance as Chinese share gains and Western OEM margin compression continue. Size to equity beta ~0.6–0.8.
• Use option structures to express asymmetric upside: buy 3-month TSLA call spreads (buy ATM, sell 20% OTM) sized 0.5–1% notional ahead of delivery/incentive reporting windows; this limits premium while capturing event-driven upside. Close on quarter-end sales prints or if IV rises >40% above entry.
• Trim/avoid direct long exposure to US charging infra (CHPT, EVGO) by 30–50% over next 3 months; trigger to redeploy if US federal/IRS guidance within 30–60 days reinstates large credits or state incentives, or Q1 retail EV sales recover >10% MoM.