Electric vehicle transition happening, North America excluded
Empirical evidence illustrates that among the 3 main electric vehicle (EV) jurisdictional centres of activity, China, Europe and North America,
- the China’s EV sector is light years ahead;
- the EU manufacturing sector is catching up; and
- North America automakers are falling way behind global EV developments.
These contrasts are well-illustrated what follows by:
- leading in with what’s behind the Volkswagen metamorphosis;
- the leveraging of mid-level tariffs on Chinese EV imports to foster local manufacturing;
- the U.S. and Canada back peddling; and
- China championing the global EV transition, encompassing electric trucks, as well as cars.
The Volkswagen metamorphous
Less than 2 years ago, the future for Made in EU EVs looked dim.
However, in December 2025, the fully electric battery electric vehicle, battery electric vehicle (BEV), EU market was 22.6%; plug-in hybrid (PHEV) 27%; hybrid electric 33.7%; and the internal combustion engine vehicle (ICEV) percent of overall sales was 22.5%. How did this disruptive change happen?
Mid-level traffic on EU imports of Chinese EVs changed everything. The Volkswagen metamorphous is telling.
In 2024, Volkswagen high costs of operating in Europe had resulted in third quarter 42% profits drops, making it unable to plan the future. The Volkswagen brand at that time had a 2.1% margin.
The Volkswagen Group had concluded in 2024 that it would have to close at least 3 factories and cut wages and employee benefits. This was an astounding shock since Volkswagen had never shut down a plant in the proceeding 87 years. For Volkswagen, its very survival was in question.
Volkswagen attributed much of its profit declines to heavy investments in transitioning from ICEVs to EVs. With the combination of high EV production costs; underperforming sales of the EV ID lineup; software challenges, a contracting European auto market at-large; and competition with lower priced Volkswagen Group brands, Skoda and Seat in particular; Volkswagen was discouraged from pursuing its EV plans. Volkswagen hesitated to invest in large-scale EV manufacturing.
Too boot, sales in China had plummeted, important since China represents 40% of Volkswagen’s global market. Chinese EV consumers prefer domestic products over foreign owned ones with the exception of Tesla Model 3 and Model Y.
This left Volkswagen with production overcapacity.
Upcoming more stringent EU emission and pollution regulations added to the Volkswagen dilemma.
Volkswagen flipped its outlook 180° in 2025 with the arrival of affordable Chinese imports with tariffs and duties ranging from 18% to 45% and strong market signals.
The EU EV market share spiraled to 34% in 2025 with 18% of EU EV sales stemming from Chinese brands.
In a 2025 about-turn, Volkswagen perceived EVs as a corporate opportunity in both European and Chinese markets.
Year 2025 saw the Volkswagen Group achieve increased EV sales in Europe, in both its car and truck divisions.
The Volkswagen Group delivered one third more EVs in 2025 than in 2024. European Volkswagen Group EV sales increased by 66%.
Volkswagen brand 2025 EV sales went up 60% in Germany and 49% in Europe.
Bigger 2025 gains stemmed from the Group’s Skoda division. Skoda BEVs and PHEVs accounted for 25% of Skoda sales.
In 2026 Volkswagen began introducing several new EV models to the market.
Overall, the brands that are part of the core of Volkswagen Group achieved an increase in 2025 EV sales of 29%.
By February 2026, Volkswagen had produced its two millionth BEV., placing the company in the BEV big league alongside BYD and Tesla.
By contrast the Volkswagen Group overall vehicle sales slumped in 2025. Volkswagen Group growth in Europe was associated with EVs only.
The situation was different in China. Volkswagen EV sales declined 44% in 2025.
Not licking its wounds, Volkswagen will be launching 20 new China-specific EV models starting 2026.
From concept to production, Volkswagen Group China came up with a unique China Electronic Architecture (CEA). Developed with three Chinese partners, the CEA has end-to-end capabilities for Software-Defined Vehicle production that positions Volkswagen to develop and produce an array of new vehicles in its China-specific lineup in just 18 months, from concept and engineering, through to validation and mass production. This made it feasible to begin offering new models in 2026.
Leveraging tariffs
To avoid EU EV tariffs, Chinese EV brands have plans for factories in Spain, Austria, Hungary and Turkey. Chery is investing in an R & D centre in Spain.
In lieu of EU tariffs on Chinese EV imports, China and the EU are discussing a minimum pricing framework. The guidelines under development stipulate minimum prices for each EV model and configuration. Other electrified models such as hybrids would be restricted under a cross-competition umbrellas that would limit sales volumes.
The latter would address the loophole that, in the EU, Chinese EV brands have increased market share, in part, because Chinese PHEVs are exempt for the tariffs, Thus, Chinese PHEVs quadrupled their EU market penetration in 2024, compared to 2023.
Especially noteworthy, it is Volkswagen that has inspired minimum pricing to replace tariffs to facilitate the importing from China of Volkswagen’s Cupra Tavascan electric SUV.
Indonesia too, has benefited from the leverage of tariffs on Chinese imported EVs. It committed to reduce tariffs for each Chinese EV manufacturer that plans by 2026 to set up factories in the country. By May 2025, 6 Chinese EV battery manufacturers had divulged intentions to establish manufacturing facilities in the country, including China’s CATL, the world’s largest EV battery producer.
In Canada, Ontario’s Premier Doug Ford expressed openness to eliminating the 100% Canadian tariff for any Chinese EV manufacturer that takes action to open up a factory in his province.
North America in reverse
In North America, investors must consider that 1) US vehicle emission standards are eliminated ;2) the Canadian EV regulated minimum manufacture-specific market shares of 20% by 2026, 60% by 2030 and 100% by 2035 has been scrapped by the Carney administration, as per a new EV strategy; and 3) there are 100% tariffs on Chinese EVs in both the U.S. and Canada.
On February 12, 2026, Trump revoked the vehicle emission regulations as part of a sweeping elimination of the Environmental Protection Agency authority to regulate emissions from any source, specifically the annulation of the greenhouse gas “endangerment finding” under the Clean Air Act. The Trump administration made it clear that the U.S. will no longer have vehicle tailpipe emission standards. Bluntly, the Trump administration has halted all action on climate change.
As for Canada’s new EV strategy presented on February 5, 2026, it is very much smoke and mirrors.
The Canadian good news consists of rebates for EVs priced C$50,000 or less if manufactured in a country with which Canada has a trade agreement. The rebate program started in February 2026 and declines each year, ending in 2030. Made in Canada EVs are exempt from the price ceiling, but that exemption currently only applies to the Dodge Charger EV and Chrysler Pacifica PHEV. The bad news is the the goal is to achieve 90% EV market share by 2040, which compares poorly to the EU 90% EV target by 2035 and 2) the 100% tariffs on Chinese EVs in Canada remain intact.
For North American shareholders focused primarily on quarterly reports, the aforementioned factors suggest that EVs don’t seem like good bets.
Such perspectives are in conflict with long-term positioning on the global marketplace.
Honda
Honda has put on a 2 year pause a $15.4 billion Ontario set of projects for retooling the Alliston EV production line, a new battery plant in Alliston and 2 battery parts facilities elsewhere in Ontario.
Ford
In August 2025, Ford announced with pomp a $5 billion dollar engagement to build a Ford EV Universal Platform that would enable Ford to produce, at scale, a family of affordable EVs.
The shoe dropped in December 15, 2025, when Ford revealed the company plans to offer fewer EV offerings and enact a $19.5 billion EV write-down.
Ford claimed it loses $50,000 for every EV sold, the long-term return on investment mindset being dropped. From 2022 to Q3 2025, Ford claimed it lost $15.6 billion attributable to its EV business.
Its change in strategy stems from lower U.S. consumer interest in EVs; Trump policies to abolish emission standards which affects EV availability; the termination of fines for non-compliance with emission standards; and the abolition of the $7,500 rebate.
Ford is now pivoting to more PHEVs and ICEVs and less fully electrics.
Ford anticipates that its global mix of hybrids, extended-range EVs (EREVs) and pure EVs will reach 50% by 2030, up from 17% today.
Surprise, in February 2026, Ford divulged that it intends to build a mid-size electric pickup on the Ford EV Universal Platform. Only Ford can explain this schizophrenia.
GM
On January 29, 2026, GM Canada announced it would cut a shift at its Oshawa Ontario plant entailing 1,200 workers throughout the supply chain.
Back in 2020 the Oshawa plant was included in the $9 billion plan slated for investments in retooling 5 GM plants to produce EVs.
To finance the transition, GM counted on the high profits on selling more larger SUVs and pickups that represented 72% of GM’s profits at the time.
In January 2026, GM indicated the Oshawa plant would manufacture the next generation of gas-powered pickups.
Once again, the change in an automaker’s strategy reflects Trump’s tariffs and the abandonment of zero emission vehicle goals in the U.S. and Canada.
China leading global change
There is a widespread belief that Chinese EVs are highly subsidized and use cheap labour, thus are low-priced. This is hard to validate.
First, U.S. and Canadian EV tax credits and other forms of financial support may be greater than Chinese EV subsidies.
Second, China does subsize innovation and development to a greater extent than any other country. This means that the timelines for cost recovery on new types of products, such as EVs, are less than for legacy automakers.
Third, the Chinese EV manufacturing paradigm is to maximize the scale of production to lower the cost per unit, thereby making the price on the market very affordable. With attractive pricing, demand meets supply, not the other way around, as it is in the rest of the world. The EU is viewed by Chinese EV brands as an ideal market for deployment of overcapacity production.
The export market is critical since EV profit margins in China are very thin, sometimes negligible with there being so much competition of the Chinese EV markets. Chinese EV manufacturers make up for these low domestic margins by selling their EVs at significantly higher prices in export markets.
Fourth, 95% of Chinese EV are equipped with the less costly lithium-iron phosphate (LFP) batteries. This is important because 40% of the price of an EV is attributable to the batteries.
Fifth, China currently has over 20 million chargers, exceeding the numbers of fuel pumps.
The result, in 2025, 54% of China’s new passenger vehicles sales were EVs.
Sixth, China requires that every Chinese EV be sold above cost and operating expenses, outside of R & D.
Seventh, China’s CATL and BYD are well advanced on the next generation of even more affordable than LFP batteries, sodium-ion batteries.
CATL now offers EV-ready sodium-ion batteries.
Changan is the first Chinese EV manufacturer to feature CATL Nextra sodium-ion batteries in its entire EV lineup, beginning 2027.
As well, Changan will begin equipping EVs with solid-state batteries in 2027. SAIC Motor, GAC Group, CATL, and BYD have similar timelines for solid-state-batteries in their respective lineups. Solid-state batteries have a range similar to gas-powered vehicles.
Eighth, now China is making global history with electric medium- and heavy-duty trucks capturing over 50% of the domestic market as of the beginning of 2026. This is an astounding breakthrough because medium- and heavy-duty trucks account for nearly a third of road transportation emissions even though they only represent 3% of vehicles on the road.
An EV truck incentive program, dedicated charging infrastructure for trucks along key freight corridors and the launching of a CATL electric truck battery swapping stations to cover 150,000 km on China’s highways contributed to this success.
China’s electric truck progress has immediate implications for global diesel consumption, cutting global oil demand by an equivalent of one million barrels per day. Global diesel use fell 11.6% in 2025.
In sum, EVs are now price and charge competitive with ICEV passenger cars and trucks in China, and this will be more so with the arrival of inexpensive sodium-ion batteries.
The takeaway
Clearly, China is several steps ahead of the rest of the world in affordable EVs and batteries.
The mid-level EU tariffs on Chinese EVs and stiff 2025 EU emission standards have been catalysts for European manufacturers to go the full distance to compete with Chinese EVs.
Mid-level tariffs on Chinese EV brands in certain jurisdictions are leveraged for domestic manufacturing of Chinese EV brands.
To thrive in the Chinese market, legacy automakers typically partner with Chinese firms to introduce China-specific models equivalent in sophistication to Chinese EV brands.
In contrast, 100% Chinese EV import tariffs, in addition to weakened U.S. and Canadian governments’ zero emission vehicle goals, have resulted in the North American auto sector going in reverse on EV development, manufacturing, deployment and sales.
The future doesn’t augur well for North American automakers. The onslaught of continuously more advanced EVs from China, Europe, South Korea and elsewhere in Asia may lead to another crisis for the Big 3.
The global transition is in progress. There will be winners and losers.
