Electric cars became more affordable across much of the world in 2025 — except the U.S.
One in four cars sold globally is now electric. Penetration in the U.S., however, still hovers just around 10%, according to the International Energy Agency’s Global EV Outlook 2026 report released on May 20.
Over the past year, average EV battery prices declined by 8% due to relatively low raw material costs and widespread adoption of lithium iron phosphate technology, which reduces reliance on expensive materials like cobalt and nickel. Global electric car sales exceeded 20 million during the year, growing by 20% from 2024.
In the U.S., sales were slightly down last year, with policy shifts making it harder to manufacture and afford EVs. The lack of low-cost Chinese options added to the problem, as did the country’s love for big cars.
U.S. EV policy’s pitfalls
In April 2023, the Joe Biden administration set a target to ensure 56% of all new cars sold in the U.S. by 2032 would be electric. In January 2025, the Donald Trump administration eliminated the mandate through an executive order to “promote true consumer choice.”
In July last year, the One Big Beautiful Bill Act eliminated penalties for automakers that fail to meet fuel efficiency standards, making them less incentivized to sell EVs.
On the buyer’s side, the Act made buying and owning EVs more expensive by terminating tax credits for new and used vehicle purchases after September 2025. It also proposed an annual $250 fee for EV owners to offset traditional taxes on gas that fund road and highway repairs.
New EV sales in the U.S. during the last quarter of 2025 were 45% lower than the same period in 2024, the IEA said.
“In the absence of the tax credit, there is expected to be virtually no government financial support for the purchase of electric cars in 2026,” IEA said.
In Canada, the share of electric car sales decreased from nearly 17% in 2024 to 11% in 2025, due in part to the ending of a rebate programme that subsidised EVs.
While North America was pulling back on policy incentives and subsidies, the rest of the world was doubling down on them. The IEA noted some of the key incentives launched in different parts of the world in 2025 that encouraged automakers and buyers to lean toward EVs.
U.S. automakers also tried to push EV sales by slashing prices and launching cheaper trims, but to little avail.
Chinese brands, which are among the most affordable EVs in the world and lead sales in most global markets, attract 100% import duties in the U.S., making them unattractive to buyers.
Affordable Chinese brands drove EV sales in Latin America, Southeast Asia, and Europe, making up to 85% of market share in some countries last year.
In countries like Indonesia, the small share of cars that weren’t imported was still produced by Chinese carmakers locally. Not only are Chinese EV makers staying away from the U.S., but the country has also cancelled major plants involving Chinese battery giants like Gotion and CATL, and it bans Chinese software in connected cars.
Big cars, big price tags
U.S. buyers lean heavily toward large cars like SUVs. More than 85% of EV models available in the U.S. are SUVs or other large vehicles — the highest share in the world.
The price tag of a larger, heavier, and more premium EV with a bigger battery is naturally more expensive, putting it out of reach of the mass market.
Globally, SUVs comprised roughly half of all EV models in 2025. In Europe, the share was higher at three-quarters, but “the availability of small EVs in Europe has improved significantly in recent years and is set to expand further in response to upcoming EU policy developments,” IEA noted.
As the electric market shifts from high-income early adopters to mass-market consumers, carmakers are wooing them with cheaper models. Vietnam, where EV penetration exceeded 40% in 2025, is proof. Its domestic EV maker VinFast “has captured nearly the entire market, and its small affordable models have been key enablers of mass-market adoption,” IEA said.