Global EV demand diverges, ESS momentum accelerates

Overview

This report updates April 2026 global EV/PHEV sales, penetration, automaker and battery supply chain Q1 earnings commentary, and combines ESS, AI data center power demand, regional subsidies, and oil price changes to assess investment opportunities. The core conclusion is that EV demand is diverging by region: Europe remains strong, China penetration has rebounded, and the U.S. is still weak; by contrast, ESS demand is showing a clearer acceleration trend in earnings from battery companies, storage system providers, and utilities.

Core views

The report believes global EV/PHEV penetration improved month over month in April, but the structure is uneven. Europe benefited from national subsidies and demand recovery, with EU-5 penetration rising to 31%; China NEV penetration rebounded to 61%, and the team maintains its full-year passenger NEV penetration forecast of 55%; the U.S. penetration was only 7%, and EV share failing to break above roughly 6% supports a normalized range of 5%-6%. In investing terms, Korean auto OEMs benefit from a higher HEV mix and earnings resilience; battery makers are viewed as superior to materials and lithium resource names because of stronger ESS, BBU, and data center demand; among Chinese names, the team prefers BYD-H for global expansion execution and CATL for its technological and market leadership in EV and ESS batteries.

Analysis framework

The report combines regional sales and penetration tracking, Q1 earnings commentary from automakers and battery companies, relative valuation comparison across the supply chain, and a review of ESS demand catalysts. Regional analysis covers EU-5, the U.S., and China; company analysis spans automakers, battery cells, cathode materials, utilities, and storage system companies; the valuation section uses FY26E/FY27E P/E, EV/EBITDA, sales growth, and margin metrics for cross-sectional comparison.

Methodology notes

• Regional penetration trackingMonthly monitoring of EV/PHEV sales and penetration

  Use monthly sales, YoY, MoM, and penetration to judge changes in NEV demand.

  The report compares April EV/PHEV sales and penetration across EU-5, the U.S., and China to identify regional divergence between European growth, China rebound, and U.S. weakness.

• Earnings-call attributionQ1 earnings commentary cross-check

  Combine management commentary from automakers, battery companies, battery materials, storage, and utilities to validate the demand direction.

  The report uses commentary from companies such as GM, Ford, VW, LGES, Samsung SDI, CATL, L&F, Ecopro BM, Vistra, NextEra, and Fluence to assess EV, HEV, and ESS trends.

• Relative valuationFY26E/FY27E P/E and EV/EBITDA comparison

  Compare attractiveness across supply chain segments using earnings multiples, sales growth, and margins.

  The report compares battery makers, materials producers, and lithium resource companies within the Asian EV ecosystem under a common valuation framework, and accordingly prefers battery manufacturing.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hyundai Motor Company, Kia Corp

  Korean auto OEMs, preferred names in the report

  Strengths

  A higher HEV mix provides earnings resilience, and the report views auto margins as relatively stable.

  Weaknesses

  Global EV demand divergence may limit valuation expansion, and weak U.S. EV demand will also weigh on sentiment.

  Comparison

  Compared with pure EV supply chain names, the HEV mix makes them more defensive during periods of demand uncertainty.

  Risks

  Oil price declines, weaker-than-expected HEV demand, intensifying regional competition, and FX and policy changes.

• BYD Company Limited-H

  China NEV and global expansion name

  Strengths

  The report is constructive on its global expansion execution and overseas capacity ramp-up.

  Weaknesses

  Total passenger vehicle sales in China are down YoY, and domestic competition and pricing pressure remain.

  Comparison

  Among Chinese OEMs, the report highlights BYD-H's execution and globalization advantage.

  Risks

  Delayed overseas capacity ramp-up, competition and tariff policies in Europe, price wars, and subsidy changes.

• CATL-A, CATL-H

  Global EV and ESS battery leader, preferred name in the report

  Strengths

  EV shipments are up about 50% YoY and ESS about 130% YoY, with clear technology and market leadership.

  Weaknesses

  Short-term supply chains may be disrupted by geopolitical conflict, and industry competition remains intense.

  Comparison

  Compared with most battery materials companies, CATL has stronger scale, technology, and order advantages in both EV and ESS.

  Risks

  Raw material volatility, changes in overseas policy, supply chain disruptions, and ESS order conversion falling short of expectations.

• LG Energy Solution, Samsung SDI

  Korean battery manufacturers, relatively preferred by the report

  Strengths

  Samsung SDI is benefiting from ESS, BBU, and UPS demand, while LGES has a target to grow its LFP ESS backlog.

  Weaknesses

  LGES underperformed expectations in 1Q due to fixed costs and new plant preparation, and ramp-up was constrained by pack bottlenecks.

  Comparison

  The report explicitly prefers battery manufacturers over materials and lithium resource companies because of stronger pricing power and execution capability.

  Risks

  Unsuccessful new capacity ramp-up, delayed customer demand, weak U.S. EV demand, and changes in storage project delivery timing.

• LG Chem, L&F, Ecopro BM, POSCO Future M

  Battery materials segment

  Strengths

  Several companies guide for cathode shipment growth in 2026, and LFP and high-nickel materials still have medium-term opportunities.

  Weaknesses

  Compared with battery makers, the materials segment has weaker pricing power and earnings flexibility and depends more on customer orders and raw material prices.

  Comparison

  The report is OW on LG Chem and L&F, N on Ecopro BM, and UW on POSCO Future M, showing clear differentiation within materials.

  Risks

  ASP volatility, inventory write-downs, customer concentration, delayed LFP mass production, and weaker-than-expected EV demand in Europe or the U.S.

• Vistra, NextEra, Fluence

  U.S. power and ESS demand-related companies

  Strengths

  Vistra is benefiting from strong power demand; NextEra maintained its roughly 8% annual EPS growth guide through 2035; Fluence's pipeline grew 30% sequentially and it signed two hyperscale MSAs.

  Weaknesses

  Fluence was weighed down by one-off shipment issues in 1Q, and project execution and delivery timing remain important.

  Comparison

  These companies validate the external pull from AI data centers, grid stability, and storage demand on the battery supply chain.

  Risks

  Power project approvals, interconnection delays, slower capex, BESS cost changes, and supply chain shifts.

Key data

• April EV/PHEV sales across EU-5 + the U.S. + ChinaAbout 1.2 million unitsDown 2% YoY and 8% MoM; penetration was 33%, up 3 percentage points both YoY and MoM.
• EU-5 EV/PHEV performanceSales up 41% YoY, penetration 31%Germany and the U.K. saw penetration rise by about 8 percentage points YoY, Italy and France by about 7 points, and Spain by about 5 points.
• U.S. EV/PHEV performanceSales down 31% YoY, penetration 7%Penetration was down 2 percentage points YoY and flat MoM; the report believes EV share has not broken above roughly 6%, supporting a normalized penetration range of 5%-6%.
• China NEV retail salesAbout 900,000 units, penetration 61%Under the CPCA methodology, April NEV retail sales were down 7% YoY and flat MoM; total passenger vehicle sales were about 1.4 million units.
• Past month performance of Asia EV supply chainJapan +24%, South Korea +12%, China +4%Within subsectors, battery foil led with +33%, followed by electrolyte +11%, cells +10%, cathode +7%, and anode and separator +3%.
• LGES LFP ESS backlog target140GWh in 4Q25, target of 230GWh by 4Q26The company signed new grid projects, with deliveries expected to start in 2028.
• CATL 1Q performanceEV shipments about +50% YoY, ESS about +130% YoYManagement said production remained strong in April and May, UTR was about 85%-90%, and AI power demand is accelerating data center ESS demand.
• AI data center ESS demand assumptionA 1GW data center may require 15-20GWh of ESSThe report cites CATL estimates and believes rising AIDC power demand will strengthen storage demand.
• Incremental ESS demand related to Middle East conflict100-200GWh per yearThe report believes oil price and energy security changes could add utility-scale storage demand relative to pre-conflict expectations.

Impact & implications

The investment implication is that the EV supply chain should not be traded simply as a broad volume recovery story, but rather differentiated by region and segment. Europe and China support a repair in EV/PHEV penetration, while U.S. demand still constrains a balanced global recovery; a higher HEV mix is supportive of Korean automaker earnings resilience; ESS, BBU, and data center storage demand increase the growth visibility of battery makers. Compared with materials and lithium resource names, battery makers are considered to have better pricing power, order visibility, and execution capability.

Risks

• U.S. EV/PHEV demand remains weak, making it hard for penetration to break out of the normalized range.
• Rising Chinese OEM share in Europe may intensify price and margin competition.
• Higher EV mix may pressure profitability for some legacy automakers, especially before next-generation platforms roll out.
• Although the Middle East conflict may lift oil prices and ESS demand, it could also cause short-term supply chain disruptions.
• New plants, LFP lines, ESS projects, and overseas capacity ramps may fall short of expectations.
• Raw material prices, ASPs, and inventory write-downs will affect the earnings quality of battery materials companies.

What to watch

• Whether EU-5 EV/PHEV penetration continues to be supported by subsidies and demand recovery.
• Whether China NEV penetration can remain near or above the full-year forecast of 55%.
• Whether U.S. EV/PHEV penetration remains in the roughly 5%-7% range.
• The impact of oil prices and the Middle East conflict on NEV demand and utility-scale ESS orders.
• ESS orders, utilization rates, and delivery timing at LGES, Samsung SDI, and CATL.
• Whether AI data center power demand continues to translate into BESS and grid storage orders.
• Changes in Chinese OEM share in Europe, incentive policies, and price competition.
• Mass production timelines and customer validation progress for LFP, sodium-ion, and high-nickel cathode materials.