The EV Slowdown in 2026: Causes, Impacts, and Future Outlook

As we enter February 2026, the electric vehicle (EV) sector is experiencing a notable slowdown, marking a pivotal shift in the automotive landscape. What was once hailed as the inevitable future of mobility—driven by aggressive policy incentives, technological advancements, and environmental imperatives—has encountered headwinds that have tempered growth projections. Reputable sources such as Cox Automotive and Automotive News report a sharp decline in EV registrations, with a 48% plunge in December 2025 following the repeal of key tax credits. This downturn is not isolated; global forecasts from S&P Global and PwC indicate stagnant or declining EV adoption in mature markets like the U.S. and Europe, while emerging regions like Africa, including Kenya, show resilient but uneven progress. Major automakers have collectively written off over $55 billion in EV investments, signaling a strategic pivot toward hybrids and internal combustion engines (ICE) amid regulatory changes and economic pressures. 

This article explores the multifaceted causes of the EV slowdown, its immediate and long-term impacts on the industry, consumers, and global supply chains, and the outlook for recovery. Drawing from data by Edmunds, J.D. Power, and Reuters, we examine how tariffs, consumer preferences, infrastructure gaps, and geopolitical tensions are reshaping the sector. With a focus on both global trends and regional dynamics in Kenya—where EV registrations surged 561% in 2025 but face unique challenges—we provide a comprehensive, fact-based analysis for stakeholders navigating this transition.
The Root Causes of the EV Slowdown
The EV market's deceleration in 2026 stems from a confluence of policy reversals, economic factors, and market realities. In the U.S., the expiration of federal EV tax credits at the end of 2025 triggered a rush of purchases in Q4, followed by a stark January reset. Cox Automotive's EV Market Monitor for January 2026 shows new-vehicle EV demand softening sharply, with inventory building while used EV sales strengthen. Forecasts from Edmunds and Cox Automotive project EVs to represent only 6% to 8% of U.S. new-vehicle sales in 2026, a far cry from earlier double-digit expectations. Policy uncertainty under the Trump administration has exacerbated this. Relaxed emissions rules and the imposition of tariffs—up to 100% on Chinese EVs—have deterred investments and increased costs. Trump's EPA deregulated greenhouse gas emissions from vehicles in February 2026, further diminishing the urgency for electrification. In Europe, the EU's retreat from stringent EV mandates, coupled with retaliatory tariffs, has led to a resurgence in diesel offerings by companies like Stellantis. Volvo, for instance, cited U.S. tariffs and exchange rates for its 2025 profit slump, yet anticipates growth through electrified products amid the slowdown.

Consumer behavior plays a central role. Deloitte's 2026 Global Automotive Consumer Study reveals shifting expectations, with 95% of Indian consumers willing to pay for software-defined vehicles (SDVs) but affordability remaining a barrier in Western markets. High upfront costs—U.S. EV average transaction prices (ATP) at $58,124 in 2025—coupled with range anxiety and charging infrastructure gaps, have cooled demand. In Kenya, while EV registrations exploded to over 39,000 by late 2025 (mostly two-wheelers), passenger car adoption lags due to limited public charging (around 100 stations) and high import duties on non-assembled vehicles. Supply chain disruptions, including semiconductor shortages and battery material constraints, compound the issue. GlobalFoundries and Renesas are expanding partnerships to address chips, but tariffs on advanced computing components (25% as of January 2026) threaten EV production. In Africa, Kenya's push for local assembly of Chinese EV kits—via companies like Rideence Africa and Saglev—aims to mitigate costs, but rural infrastructure remains a hurdle. Geopolitically, China's dominance in EV production has sparked trade tensions. The EU denied plans for tariffs on Chinese hybrids and PHEVs in January 2026, opting for minimum-price mechanisms instead. However, U.S. restrictions on EV tech transfers and investments have forced Western OEMs to diversify, leading to nearshoring in Mexico and Eastern Europe.
Immediate Impacts on Automakers and Supply Chains
The slowdown has prompted strategic realignments. General Motors (GM) took a $6 billion charge in Q4 2025 to adjust its North American EV strategy, shrinking 2025 results but positioning for resilience. Hyundai foresees a difficult 2026 with modest growth, while Nissan shuttered seven plants amid declining profits. Mercedes-Benz reported a €1 billion hit from tariffs, accelerating autonomous tech for the 2026 S-Class. Globally, S&P Global predicts a 5-10% drop in light-vehicle output due to these factors. Supply chains are under strain. Bosch cut 13,000 jobs in its mobility division after a painful 2025, pushing back profit targets. Diversification is key: PwC notes on-shoring incentives prompting production pivots, with U.S. firms ramping up in Mexico despite risks. In Kenya, local assembly deals—like Rideence's $2.46 million pact with Associated Vehicle Assemblers—lower costs to ~KSh 5-10 per 100 km vs. KSh 600+ for petrol, but battery compatibility and rural access limit scale. Inventory dynamics reflect the shift. U.S. new-vehicle inventory tightened entering 2026 after strong December sales, with SAAR at 15.4-15.7 million units. Slowest-selling cars average $83,240, including EVs like the Volkswagen ID.4. Hybrids, like Toyota's RAV4, dominate fastest-sellers due to efficiency without range anxiety.
Consumer and Market Implications
For consumers, the slowdown means higher prices and fewer choices initially. U.S. ATP for new vehicles hit $50,080 in 2025, with EVs pricier. Affordability improves slightly with lower loan rates, but tariffs could reverse this. In Kenya, tax breaks under the National Electric Mobility Policy—exempting VAT on EV parts and charging—aim to cut costs, with green plates introduced in 2026. Models like the Nissan Leaf dominate used imports, while local efforts by TAD Motors target affordable EVs for East Africa. Market fragmentation is evident. J.D. Power projects 16.3 million U.S. sales in 2026, flat from 2025. Hybrids rise as a bridge, with plug-ins jumping 155% in Europe. Consumer Reports ranks Subaru, BMW, and Porsche as top brands for 2026, with Tesla in the top 10 despite EV woes.

Innovation Amid Adversity
Despite the slowdown, innovation persists. Solid-state batteries and V2G tech advance, with Forbes predicting heterogeneous powertrains and SDVs as key trends. AI integration, per Deloitte, reshapes workflows. Autonomous levels progress to 2.5/3, with Uber investing $100 million in AV hubs. In Kenya, battery-swapping by Spiro and Roam reduces downtime for boda bodas.
Long-Term Outlook and Recovery Strategies
Looking ahead, recovery hinges on policy clarity, cost reductions, and infrastructure buildout. S&P Global sees electrification slowing but not stopping, with AI and software opening opportunities. In the U.S., J.D. Power's flat sales forecast suggests stabilization, while Europe's diesel resurgence buys time. Kenya's incentives could double EV fleets by year-end, focusing on vans and taxis. Strategies include diversification: OEMs like Ford exploring partnerships with Geely for low-cost EVs. Nearshoring mitigates tariffs, and consumer education addresses myths. By 2030, EVs could rebound to 30-40% market share if batteries drop below $100/kWh.
The 2026 EV slowdown is a recalibration, not a reversal, driven by policy shifts, economic realities, and infrastructure needs. While challenges persist, innovations in hybrids, AI, and local assembly offer pathways forward. In Kenya, this represents an opportunity for sustainable mobility, aligning with Africa's e-mobility boom. Stakeholders must adapt to ensure the transition to greener transport endures.