Global auto sales in May remained resilient, but long-term US EV penetration expectations were revised down

Overview

This report is Nomura’s Global Auto Monthly follow-up, covering May auto sales, regional contributions, powertrain mix, Japanese OEM production, US market share, Europe and China powertrain mix, India and Southeast Asia market shares, and long-term xEV penetration outlooks. The core conclusion is that global auto sales remained resilient in May, with stronger growth once China and Russia are excluded, while US policy and trade-framework uncertainty, EV supply-chain constraints, and affordability issues are reshaping the medium- to long-term electrification path.

Core views

The report believes global auto demand has not clearly lost momentum in the short term, with India and Brazil as growth highlights in May; North America and Europe’s 2026-2027 forecasts remain more muted. Structurally, possible non-renewal of USMCA could expose OEMs to longer policy and origin-rule volatility, with smaller OEMs and suppliers under more pressure, while OEMs with stronger balance sheets and broader US manufacturing footprints are more resilient. On electrification, Nomura maintains that US EV demand is likely weak before 2030 and further argues that penetration may remain suppressed at least through 2035.

Analysis framework

The report triangulates monthly sales, quarterly demand forecasts, regional sales mix, OEM market share, powertrain penetration, inventories, loan rates, affordability, FX, and incentive spend. It also incorporates USMCA, US-China relations, critical mineral supply, CAFE/GHG/CARB regulation, and OEM product and capacity strategy to assess auto demand and electrification pacing.

Methodology notes

• Industry cycle tracking18-market monthly auto-sales monitoring

  Uses month-over-month sales growth in major countries/regions and growth excluding China and Russia, combined with regional contribution analysis, to judge global demand resilience.

  The report shows May month-over-month sales for 18 tracked markets up 2% year-over-year, rising to 4% when excluding China and Russia, and focuses on where incremental growth came from, notably India and Brazil.

• Demand forecastingGlobal auto demand forecasting

  Provides annual and quarterly sales forecasts by country/region, distinguishing historical sales, wholesale, registration, and forecast definitions.

  The report presents 2026E and 2027E sales forecasts for major markets and notes that India uses fiscal-year methodology while China passenger car history around 2020 involves differences between wholesale and registration counting.

• Powertrain penetrationLong-term xEV penetration outlook

  Segments long-term sales and penetration into HV, EV, PHEV, and FCV to assess electrification paths across regions.

  The report significantly revises down long-term US EV estimates, arguing that OEMs are transitioning away from EV more clearly in the US, while critical minerals, supply-chain constraints, origin-rule uncertainty, and regulation changes are dampening adoption speed.

• Policy and trade riskUSMCA annual-review and origin-rule analysis

  Evaluates the impact of post-USMCA non-renewal through annual bilateral negotiations, NA content requirements, US domestic-value standards, and non-market-economy origin rules on OEMs.

  The report argues that non-renewal would weaken long-term policy certainty and could give OEMs with stronger balance sheets and broader US manufacturing footprints a relative advantage.

Asset mapping & comparison

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

• Global automobile OEMs

  Direct bearers of industry demand and policy risk

  Strengths

  Global demand retains some resilience, with robust growth in parts of emerging markets; multi-region production and sales footprints can diversify single-market shocks.

  Weaknesses

  USMCA uncertainty, tighter origin rules, EV affordability issues, and critical mineral supply constraints could compress earnings and investment returns.

  Comparison

  OEMs with stronger balance sheets and broader US manufacturing footprints fare better than smaller firms with concentrated supply chains or weaker North America compliance capability.

  Risks

  Volatile policy negotiations, tariff or origin-rule changes, EV demand below expectations, higher financing costs, and weakening consumer confidence.

• Toyota (7203 JT, Neutral)

  Cited as a diversified OEM more capable of handling USMCA volatility

  Strengths

  Has a stronger balance sheet and a broad multi-state US manufacturing footprint, giving it greater operating flexibility and political leverage.

  Weaknesses

  Still exposed to US policy, FX, incentive spending, consumer affordability, and the global demand cycle.

  Comparison

  Compared with smaller OEMs and suppliers, Toyota has greater shock absorption under policy swings.

  Risks

  USMCA rule escalation, softer US demand, lagging EV strategy adjustments, or erosion of hybrid advantage.

• EV supply chain

  Core asset class most affected by revised long-term penetration assumptions

  Strengths

  May still benefit from battery technology progress and diversification of critical mineral supply over the long term.

  Weaknesses

  Weak US affordability, slow progress on non-China critical-mineral projects, frequent policy changes, and OEM portfolio shifts are dampening short- to medium-term growth.

  Comparison

  US EV adoption is weaker than previously expected; HV and PHEV may carry stronger relative appeal in the transition period.

  Risks

  Ongoing US-China geopolitical tensions, constrained critical-mineral supply, CAFE/GHG/CARB regulatory shifts, and subsidy phase-down.

• Indian auto market

  A key positive contributor to May global growth

  Strengths

  GST cuts, policy support, OEM promotions, and front-loaded demand supported strong consecutive sales gains.

  Weaknesses

  Higher prices, weaker-than-average El Nino rainfall, and a high base from the India GST cut in September 2025 could weigh on 2H26.

  Comparison

  India shows higher short-term growth than mature markets, but demand pace is more sensitive to policy and weather.

  Risks

  Inflation, demand normalization after pre-buying, rainfall below average, and fading promotions.

• Brazil auto market

  Emerging-market highlight supported by hybrid and EV demand

  Strengths

  May sales were up 22% year-over-year, and aggressive pricing by Chinese OEMs such as BYD improved imported vehicle competitiveness.

  Weaknesses

  Part of the growth relies on price competition and imported-vehicle contribution, so durability needs monitoring.

  Comparison

  Brazil outperformed most developed markets in May and was more responsive on EV demand.

  Risks

  Price wars, FX volatility, changes in import policy, and deterioration in consumer credit conditions.

Key data

• May auto sales across 18 tracked marketsUp 2% year-over-yearThe pace was broadly similar to April, indicating global demand remained resilient.
• Global sales in May excluding China and RussiaUp 4% year-over-yearExcluding the two volatile markets, both of the first two months of 2Q26 posted growth.
• India May salesUp 25% year-over-year after excluding commercial vehiclesThis pace was reached for a second straight month, supported by GST cuts, policy backing, OEM EV promotions, and front-loaded demand.
• Brazil May salesUp 22% year-over-yearHybrid and EV demand were strong, and aggressive pricing by Chinese OEMs boosted imported vehicles to roughly one-third of light-vehicle year-over-year incremental volume.
• Global auto demand forecastUp about 1% year-over-year in 2026 after excluding China, up about 2% year-over-year in 2027Summary of the global demand forecast in Fig.3.
• US new-car sales forecast2026E 16.30 million units, 2027E 16.55 million unitsThe table shows a 0.3% year-over-year decline in 2026E and a 1.5% year-over-year increase in 2027E.
• North America sales forecast2026E 19.75 million units, 2027E 20.05 million unitsCorresponding to a 0.1% year-over-year decline in 2026E and a 1.5% year-over-year increase in 2027E.
• Nomura rating distributionBuy 58%, Neutral 39%, Reduce 3%As of Nomura Group Global Equity Research disclosure through 2026-06-30.

Impact & implications

From an investment perspective, short-term auto demand is not broadly weakening, but regional and powertrain segmentation is pronounced. India and Brazil indicate stronger growth elasticity in emerging markets, while the US is burdened by trade-policy, financing-cost, affordability, and EV supply-chain constraints. If USMCA rules tighten, global OEMs with multi-state US manufacturing footprints, stronger cash flow, and greater political bargaining flexibility are more likely to maintain operating resilience. OEMs and suppliers dependent on concentrated supply chains, with weaker balance sheets or limited North American compliance buffers, face higher risk.

Risks

• Non-renewal of USMCA would trigger annual reviews and bilateral negotiations, potentially reducing long-term certainty for OEM investment and supply-chain planning.
• If North America content requirements, US domestic-value ratios, and origin rules for non-market economies such as China tighten further, compliance costs and execution burdens will increase.
• US EV demand may remain subdued at least through 2035, which could pressure electrification investment returns and capacity utilization.
• Critical minerals and EV supply chains remain exposed to China’s influence, swings in US onshoring policy, and uncertainty in non-China project progress.
• India in 2H26 may face pressure from high prices, weak El Nino rainfall, and a high base from the first anniversary of the GST cut.
• Deterioration in auto financing, consumer debt load, rates, and new-car affordability could suppress US demand.

What to watch

• Progress in annual reviews and bilateral talks on post-USMCA arrangements between the US and Mexico/Canada.
• Whether North America NA content ratios, US domestic-value shares, and origin rules are tightened further.
• Whether US-China relations shift from confrontation toward cooperation and whether non-China critical-mineral projects are commissioned earlier than expected.
• How changes in CAFE, GHG, and California CARB rules affect OEM EV planning.
• Whether sales momentum in India remains sustainable in 2H26 amid base effects, weather, and pricing pressure.
• Whether Brazil hybrid and EV demand can maintain endogenous growth beyond pure price competition.
• US inventory days, auto loan rates, secondary lending, incentive spending, and consumer sentiment.