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Electric vehicle sales are set for their slowest annual growth since the pandemic upended the global economy in 2020, as the shift away from the internal combustion engine confronts new hurdles.

A cooling in red-hot Chinese demand, weaker growth in Europe and a contraction in the US market will see EV sales rise 13 per cent to 24mn in 2026, down from an estimated 22 per cent increase last year, according to research firm Benchmark Mineral Intelligence.

The Trump administration’s ditching of tax incentives for EVs, the EU’s watering down of a ban on petrol cars that was due to take effect in 2035 and a slowing in China’s breakneck pace of growth will shape the fortunes of the industry this year, say executives and analysts.

The more moderate outlook follows several years of explosive China-led demand that had appeared to herald the rapid demise of petrol-based cars, which have powered the auto industry’s profits for more than a century.

Mark Wakefield, managing director at consultancy AlixPartners, said: “We have headwinds in China, which has been the engine of growth, and there’s probably more to come on softening of European regulations.”

US sales will tumble 29 per cent to 1.1mn vehicles this year after reaching a record 1.5mn in 2025, according to Benchmark. Sales in Europe are forecast to climb 14 per cent to 4.9mn following an estimated 33 per cent increase in 2025.

In China, the largest EV market, sales are expected to hit 15.5mn, up from 13.3mn in 2025, according to Benchmark’s forecasts, which include full EVs as well as plug-in hybrids.

Although still a double-digit pace, the projected growth in China is below that recorded in the five years to 2025, when sales, including those of plug-in hybrids, soared from about 1.1mn to more than 13mn.

Chinese manufacturers, led by BYD, helped spur sales at home and in Europe last year, through the rollout of cheaper models that undercut legacy European and US carmakers.

BYD replaced Tesla as the world’s biggest electric-car maker in 2025, according to figures released this week, as the Chinese group made inroads in Europe and other overseas markets.

This year executives expect a continued pick-up in sales of hybrids and plug-in hybrids, which have grown more popular as inadequate charging infrastructure puts consumers off buying fully electric vehicles.

“Both markets (in the US and Europe) are learning that partial electrification is as interesting as full electrification,” said Ford chief executive Jim Farley.

In a sign of the upheaval in the US market, Ford last month disclosed a $19.5bn charge after ditching a series of EV models, including its flagship F-150 all-electric pick-up truck, to focus on more profitable hybrids and ICE-based vehicles.

Farley said EVs’ share of the new car market in the US could fall from about 10 per cent last year to 5 per cent in the near term.

In contrast to the US, most executives expect the Chinese market to expand in 2026 but more slowly than in recent years, when Beijing backed the EV industry with generous subsidies and tax incentives in a bid to turn it into a global champion.

UBS predicts sales in China — of both full EVs and plug-in hybrids — will climb 8 per cent this year.

Although Beijing has rolled back support for the industry, this week the government extended its trade-in subsidy policy, which includes discounts for EVs, into a third year.

Chinese sales could still benefit from wider stimulus measures intended to boost domestic consumption as well as local government investment in charging infrastructure.

Executives say that the prospect of a tougher year means carmakers must continue to adapt their line-ups during the shift from petrol engines.

Markus Haupt, chief executive of Seat-Cupra, the Spanish mass-market brand owned by Volkswagen, said that the group needed to keep its product line-up flexible during the transition but added: “We are convinced that the future is electric. We need to decarbonise mobility.”