How the Automotive Markets in the US and Europe Are Changing

Why It Matters

The evolving regulatory landscape and supply‑chain constraints reshape profitability and competitive advantage for OEMs, while innovative payment platforms become essential for maintaining liquidity and sustainability across the automotive ecosystem.

Key Takeaways

• US EV sales 14.7M 2025, 17.4M 2026 forecast.
• California holds 35% US EV registrations.
• Tax credit removal cut US light‑vehicle sales 5.8% YoY.
• Asian firms dominate top ten global vehicle producers 2026.
• EU Battery Passport 2027 enforces EV material traceability.

Pulse Analysis

The electric‑vehicle surge is redefining market dynamics in both the United States and Europe. California’s Zero‑Emission Vehicle (ZEV) program, which aims for 100% zero‑emission new‑car sales by 2035, has propelled the state to hold roughly one‑third of all U.S. EVs. Conversely, the recent rollback of federal EV tax credits has shaved nearly six percent off national light‑vehicle sales, prompting manufacturers to explore nearshoring strategies that could mitigate tariff‑driven cost pressures on critical inputs like aluminium.

Asian manufacturers continue to dominate global production, with Toyota, BYD, Geely and Hyundai occupying five of the top ten slots for 2026 light‑vehicle output. This dominance intensifies the reliance on critical minerals—lithium, cobalt, nickel, and graphite—most of which are refined in China, raising concerns over supply security and ethical sourcing. The European Union’s forthcoming Battery Passport legislation in 2027 seeks to embed traceability and ESG compliance into every EV battery, signaling a regulatory push toward transparent, sustainable supply chains.

Financial technology is emerging as a decisive lever for resilience. Platforms such as SAP Taulia offer dynamic discounting and supply‑chain finance that enable OEMs to extend working‑capital flexibility while rewarding suppliers that meet ESG criteria. By linking early‑payment incentives to sustainability performance, manufacturers can accelerate the transition to greener operations without sacrificing cash flow, a balance that is increasingly critical as the industry confronts both regulatory scrutiny and volatile component shortages.