Huayuan Securities has released a research report indicating that China's new energy vehicle penetration rate reached 58.5% in June 2026, shifting focus toward battery installation growth driven by higher battery capacity per vehicle. According to data from the China Association of Automobile Manufacturers, June 2026 saw total car sales of 2.81 million units in China, translating to this notable penetration figure.

Meanwhile, the European Union continues to advance its electrification agenda, with combined BEV and PHEV market share reaching approximately 30% in the first five months of the year, up about 6 percentage points year-on-year, suggesting further room for growth remains.

Domestic NEV Sales Face Pressure; Key Drivers Are Battery Capacity Per Vehicle and Export Momentum

China's domestic new energy vehicle sales experienced pressure in the first half of 2026, though June showed some recovery in growth rates, with export figures remaining impressive. Data from the China Association of Automobile Manufacturers reveals that NEV sales in China reached 7.445 million units from January to June 2026, representing a 7.37% year-on-year increase. June alone saw 1.643 million units sold, up 23.6% year-on-year, with growth accelerating by 9.2 percentage points compared to May.

Excluding exports, domestic NEV sales for the first half of 2026 totaled approximately 5.09 million units, down 13.4% year-on-year. On the export front, China shipped 2.354 million NEVs in the first half of 2026, surging 122.9% year-on-year. Exports now account for 31.6% of total NEV sales, a significant jump from the full-year figures of 9.9% in 2024 and 15.7% in 2025. June exports reached 523,000 vehicles, up 155.1% year-on-year, marking the highest single-month growth rate since the start of 2026.

With China's NEV penetration rate hitting 58.5% in June 2026, the report suggests that future growth will likely hinge on increased battery capacity per vehicle, driving battery installation volume growth.

European Electrification Progresses Steadily, Driven by Carbon Emission Regulations

According to data from the European Automobile Manufacturers' Association, the EU market saw BEV market share of approximately 17.4% and PHEV share of about 9.4% in 2025, combining for 26.8%. The EU's electrification push continues, with BEV and PHEV combined market share reaching roughly 30% in the first five months of the year, up about 6 percentage points year-on-year, indicating potential for further gains.

From January to May 2026, new passenger car sales in the EU reached 4.75 million units. BEV sales hit approximately 950,000 units, capturing a 20% market share, up 4.7 percentage points from the same period in 2025. Italy, France, and Germany together accounted for 63% of total BEV sales. PHEV sales reached about 460,000 units in the first five months, with market share rising to 9.7% from 8.3% in the prior-year period, driven primarily by growth in Italy, Spain, and Germany.

The brokerage attributes this progress to EU carbon emission regulations continuously pushing consumer transitions, alongside local subsidies and new energy vehicle purchase incentives that are unlocking demand.

US Sales Weaken After Subsidy Removal; State-Level Programs Could Offer Recovery Path

The US new energy vehicle market is facing headwinds from the cancellation of subsidy policies, significantly higher import tariffs, and elevated pricing of domestic models. The "Big and Beautiful America Act" took effect in July 2025, eliminating federal tax credits for NEVs starting September 30, 2025, including up to $7,500 for new vehicles, $4,000 for used vehicles, and $40,000 for commercial vehicles.

According to data from Argonne National Laboratory, US NEV sales (BEV plus PHEV) declined 3.6% year-on-year in 2025, primarily due to weaker sales in the October-December period. In the first half of 2026, US electric vehicle sales (pure electric and plug-in hybrid) totaled 551,900 units, down 28.5% year-on-year, with market penetration at approximately 7%.

Different states are expected to enact their own legislation and subsidy programs. In July 2026, California Governor Gavin Newsom signed SB 168, establishing an immediate rebate program for zero-emission vehicles called "MyFirstEV." Huayuan Securities believes that if more states implement similar subsidy programs, the US automotive electrification process could see meaningful recovery.

Risk Warnings

Key risks include downstream demand falling short of expectations, supply-demand mismatches, and new technology scaling progressing slower than anticipated.