Global EV Divergence: Strong EU, Weak US, Storage as Top Highlight

Overview

This research note tracks global electric vehicle (EV/PHEV) sales data and battery supply chain dynamics for May 2026 across major markets. The core conclusion reveals significant regional divergence in global electrification trends: EU penetration continues to climb driven by subsidies and affordable models; China's high NEV penetration faces pressure from an overall weaker auto market; and the US market remains sluggish due to reduced model availability. Meanwhile, energy storage systems (ESS) have emerged as the most certain growth highlight, particularly with accelerating realization of power requirements for AI Data Centers (AIDC). Based on supply-demand assessments, the report downgrades lithium miner SQM and recommends focusing on globally competitive battery leaders and automakers successfully expanding overseas.

Core views

Intensifying Regional Sales Divergence: The EU shows the strongest performance, with EV/PHEV sales growing 39% YoY in May, reaching 32% penetration (+8ppts YoY). France, Italy, and Germany led the gains, driven by continued subsidy programs and widespread adoption of affordable mass-market EVs. In China, while new energy retail penetration hit a record 63% (+10ppts YoY), total passenger vehicle sales dropped 22% YoY. J.P. Morgan's China auto team revised its 2026 domestic retail forecast downward from -4% to -15%, viewing structural shifts toward new energy and overseas business as the primary profit drivers replacing total industry volume growth. Conversely, the US market remains depressed, with EV/PHEV sales falling 21% YoY and penetration dropping to 7%, reflecting weak demand after manufacturers canceled certain new model launches and cut marketing spend, reducing consumer choice. New Opportunities in Storage & AIDC: Energy storage is currently the clearest bright spot in the supply chain, with global shipments more than doubling in the first four months of 2026. Momentum is accumulating for power integration at AI Data Centers (AIDC); Siemens and NVIDIA partnered with Fluence Energy to develop reference architectures, and Fluence has signed master supply agreements with hyperscale clients, with initial orders expected to land in Q3. The report notes that AIDC storage progress may appear slow superficially due to construction phases; however, its specific requirements for fast charge/discharge rates and high power density distinguish it from traditional large-scale storage, benefiting top players with technological barriers. Structural Upgrade in Chinese Automaker Global Expansion: Chinese automakers' overseas expansion has evolved from a simple 'low-price EV' narrative into a structural strategy involving diversified powertrains, brand laddering, and technology storytelling. In the European market, Chinese automakers now hold an 18% NEV share (tripled YoY), aided by a moat of retail execution and standard-high specification content, with localized production accelerating to mitigate tariff risks. Accordingly, the report upgrades 2026 overseas sales forecasts for BYD and Geely by approximately 15%-30%. Upstream Resource Outlook: While global lithium supply and demand point to a deficit over the next two years, short-term upside for lithium prices from current spot levels is limited. Key headwinds include rebounding Chinese lithium inventories, battery maker resistance to high prices, and slowing growth in Chinese NEV sales. Although strong storage demand and some project deferrals support a tight market balance, this is insufficient to drive significant price increases; thus, the SQM rating is downgraded to Neutral.

Analysis framework

The research note employs a high-frequency monthly sales data tracking methodology, comparing absolute EV/PHEV volumes and penetration rate changes across the three core markets of the EU, China, and the US to identify significant divergences in regional sentiment, thereby avoiding the masking of structural opportunities by single global aggregate data points. When analyzing storage demand, the institution applies logic based on project construction cycles and process decomposition to distinguish between 'low apparent adoption' and 'actual delays in construction sequencing.' It further filters investable targets using specific AIDC technical parameters (such as micro-cycles and power density) rather than simply applying traditional storage logic. For judging industrial chain investment value, the report adopts a stock selection framework prioritizing bargaining power and execution capability. In the battery segment, preference is given to cell manufacturers with global delivery capabilities and technology premiums (e.g., CATL, LGES) over material producers disadvantaged by price wars. In the OEM segment, preference is given to enterprises where overseas growth can offset domestic stock game competition, reflecting an analytical shift from 'beta' to 'alpha'.

Methodology notes

• Industry/Industrial Analysis FrameworkS-Curve of Penetration

  Assess the electrification development stage of different markets by tracking the share (penetration) of EV/PHEVs in new car sales and their YoY/MoM changes.

  The report uses the penetration rate indicator to find that the EU is in an acceleration phase, China is in a high-level plateau phase, and the US is in a bottleneck phase. Differences in S-curve positions determine entirely different future growth slopes and investment logics for each region.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Decompose industry revenue or profit drivers into two dimensions: volume growth and price changes to identify the true source of growth.

  In the China market analysis, the report points out that while total volume/value faces pressure, the increasing share of new energy vehicles (volume/structure) indicates that corporate profitability drivers have shifted from industry beta to product structure optimization alpha.

• Competition and Strategy FrameworkMoat / competitive advantage

  Evaluate non-price competitive moats established by enterprises in overseas markets, such as retail execution, richness of product configurations, and localized production capabilities.

  The report argues that the success of Chinese automakers in Europe no longer relies solely on low prices but has built moats through channels and product strength. Such structural advantages are more sustainable than mere cost advantages.

Asset mapping & comparison

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

• CATL (300750.SZ / 3750.HK)

  World's largest energy storage battery manufacturer, maintaining technical and market leadership in the EV battery sector

  Strengths

  Technical leadership, dual-drive of global ESS/EV, significant economies of scale

  Comparison

  Higher share in global (especially non-US) markets compared to Korean battery manufacturers

  Risks

  Geopolitical risk, raw material price volatility

• LG Energy Solution (373220.KS) / Samsung SDI (006400.KS)

  Core beneficiaries of US storage market growth, benefiting from supply chain shifts under the OBBBA regulations

  Strengths

  Early localization of North American capacity,承接 transferring ESS orders from China

  Weaknesses

  Profitability awaiting recovery

  Comparison

  Have compliance and channel advantages over Chinese manufacturers in the US ESS market

  Risks

  US policy changes, slower-than-expected capacity ramp-up

• BYD (002594.SZ / 1211.HK)

  Leader in Chinese automaker global expansion; overseas sales forecast upgraded by 15%, overseas capacity accelerating release

  Strengths

  Low costs from vertical integration, strong overseas retail execution, rich product matrix

  Weaknesses

  Facing tariffs and regulatory pressures from Europe and US

  Comparison

  Faster growth in NEV market share in Europe compared to other Chinese automakers

  Risks

  Escalation of trade barriers, high overseas operating costs

• Hyundai Motor (005380.KS) / Kia (000270.KS)

  South Korean automakers benefiting from earnings resilience driven by rising HEV share

  Strengths

  Strong hybrid product line, greater earnings stability compared to pure EV manufacturers

  Weaknesses

  Relatively slower EV transition speed

  Comparison

  Higher earnings certainty in the South Korean market compared to pure EV manufacturers

  Risks

  Exchange rate volatility, intensifying competition in the US market

• SQM (SQM.US)

  Rating downgraded from Overweight to Neutral; limited short-term upside for lithium prices

  Strengths

  Low-cost salt lake lithium extraction, long-term supply-demand deficit remains

  Weaknesses

  Face inventory rebound and downstream price suppression in short term

  Comparison

  Weakened short-term catalysts compared to other lithium mining stocks

  Risks

  Prolonged low lithium prices, Chilean policy uncertainty

Key data

• EU-5 Nations EV/PHEV Penetration32%YoY +8 percentage points, MoM +1 percentage point, recent high
• China NEV Retail Penetration63%YoY +10 percentage points, but total passenger vehicle sales -22% YoY
• US EV/PHEV Sales Growth-21% y/yConsecutive YoY decline, penetration drops to 7%
• Global ESS Shipment Growth>100% y/yDoubled YoY in first 4 months of 2026, driven by domestic Chinese demand and non-US exports
• Chinese Automakers' NEV Share in Europe18%Tripled YoY, driven by localization and product strength dual engines
• 2026 China Passenger Vehicle Retail Forecast Adjustment-4% → -15%J.P. Morgan China Auto team revises full-year forecast downward

Impact & implications

For the battery supply chain, explosive growth in storage demand and the opening of new AIDC scenarios imply that leading cell manufacturers with high technical barriers will achieve growth exceeding the industry average, especially Korean companies entering the North American supply chain and global leader CATL. For OEMs, shrinking domestic market competition makes overseas capability a key variable for valuation differentiation; enterprises with overseas capacity layouts and diversified product portfolios are better able to resist risks from single markets. For upstream resources, the lack of elasticity in short-term lithium prices means related company stock performance will depend more on cost control and capacity release than price博弈; investment logic needs to shift from cyclical elasticity to long-term cost advantages.

Risks

• Continued weakness in US EV demand, with further cuts in EV model deployment by automakers
• Unexpectedly large decline in China's domestic passenger vehicle retail sales
• Delays in AIDC storage project construction or changes in technical standards
• Failure of lithium price rebound leading to deteriorating profits for upstream companies
• Further escalation of tariffs and non-tariff barriers imposed by Europe and the US on Chinese automakers

What to watch

• Implementation of Q3 orders for energy storage integrators such as Fluence Energy
• Production launch and capacity ramp-up progress of Chinese automakers' local factories in Europe
• Changes in US OBBBA regulation implementation details and impact on the battery supply chain
• De-stocking pace of Chinese lithium inventories and recovery in battery makers' purchasing willingness
• Results of the first batch of disbursements from the EU €1.5bn battery booster fund