US, Europe retreat from electric cars risks ceding race to China

BRUSSELS - The unravelling of the transition to electric cars in the US and Europe has handed Chinese automakers an opportunity to cement their dominance in the electrification race, according to analysts.

In two blows to the outlook for electric vehicles (EVs), the European Commission on Dec 16 effectively

abandoned its ban on combustion engine vehicles by 2035

.

A day earlier, on Dec 15, Ford Motor announced it would take US$19.5 billion (S$25.2 billion) in charges tied to a retreat from its electric strategy.

That creates a gap that Chinese carmakers, which have strengthened their position as the leading producers of EVs over the past decade, can fill, with companies like BYD and Xiaomi making rapid advances with in-cabin technology, advanced driver assistance systems and ultra-fast charging.

In contrast, Ford is scrapping plans for electric F-Series trucks and will shift production towards gas and hybrid vehicles.

“It’s really sinking in that the US or EU can’t catch up,” said Mr Daniel Kollar, head of automotive and mobility practice at consultancy Intralink Group.

Legacy carmakers like Ford are realising they need to provide EVs that meet local needs, he added. With a range of just 386km, the electric F-150 could not haul heavy things as far as the petrol version of the workhorse.

They need to find a strategy where they can still leverage their combustion know-how, such as with plug-in hybrids or extended-range EVs, and fend off competition from Chinese carmakers that are miles ahead when it comes to pure-battery EVs, Mr Kollar noted.

While the gloss has come off the EV market, BloombergNEF still forecasts that global sales of electric cars will increase 16 per cent in 2026 to 25.4 million units.

Europe is a key market for Chinese EV brands in search of growth and higher margins to offset a slowdown and long-running price war at home.

While the backing away from the combustion engine ban and a scaling back of incentives supporting EVs in the region could dent demand, Chinese cars still have room to compete, according to Mr Yale Zhang, managing director of consultancy Automotive Foresight.

“It won’t have a direct impact,” he said.

Even with Europe’s tariffs, Chinese carmakers “have enough edge to compete”, he added.

One of the main sticking points for drivers looking to make the switch to an electric car is price, an area where Chinese manufacturers have an advantage.

BYD earlier in 2025 launched the Dolphin Surf in Europe, a fully electric hatchback that sells for less than €23,000 (S$34,800).

The European Commission’s retreat from banning exhaust pipe emissions by 2035 shows a lack of will to do the “correct but difficult thing”, Mr Zhang said.

While it seems to be a positive move for European manufacturers, it will “inevitably lead to laziness and complacency”.

In December, Volkswagen will end output of electric ID.3 hatchbacks in Dresden, the first time in 88 years the carmaker will have ceased production at a German assembly plant.

To be sure, Chinese EV makers are also facing their own challenges such as slowing demand at home, intensifying competition and regulatory scrutiny.

BYD’s total sales have fallen for three consecutive months

, and the company is still producing one plug-in hybrid with a gas engine under the hood for every battery-only EV.

Chinese authorities are reining in unreasonable price cuts and asking carmakers to pay their suppliers faster, which could impact sales and cash flow.

And while Chinese EVs have effectively been locked out of the US by punitive tariffs, they are making steady inroads in markets from South America to the Middle East to South-east Asia.

A lack of competitive models from European and US automakers risks ceding those markets to China as well. BLOOMBERG