EU car targets drive EV sales as electricity market reforms lag

T&E’s latest EV progress report, published on 5 October, shows a sharp acceleration in European electric vehicle adoption. Strict regulatory deadlines are pushing sales up while consumer demand for cheaper models surges. This momentum contrasts with the slower, bureaucratic pace of broader energy infrastructure reforms needed to support the grid.

Record sales and the sub-€25,000 shift

Between January and August 2026, a total of 1.64 million battery-electric vehicles were sold in the EU, a 45% increase compared to the same period last year. In the second quarter of 2026, BEVs outsold pure petrol cars for the first time ever, achieving a market share of 22%. The report notes that almost 40 new electric models were launched in the first half of the year alone, taking the total number of mass-market BEVs to more than 150.

The most significant development is the expansion of the affordable segment. Lucien Mathieu, cars director at T&E, stated that European drivers are finally seeing the smaller and more affordable electric cars they have been waiting for. Sales of electric models with a starting price below €25,000 are set to increase by a factor of seven in 2026 compared to 2024. This growth is attributed to a doubling of the number of available models in this price bracket, a direct result of the 2025 to 2027 regulatory targets that incentivized manufacturers to enter the segment.

VW’s ID. Polo acts as a prime example of this demand shift. It quickly sold out with over 40,000 orders and a 10-month waitlist. Mathieu noted that the issue was never a lack of demand, but rather what manufacturers had to offer. The consumer’s appetite for small affordable electric cars has proven many previous industry claims about weak demand wrong.

Financial incentives and running costs

The economic case for EVs has strengthened further due to the ongoing oil price shock. T&E calculates that the crisis has cost EU road users €53 billion in increased fuel costs. As of mid-September, filling a 50-litre diesel tank costs €30 more than before the conflict in Iran began. For those who switched to an electric car at the start of the crisis, the savings in running costs amounted to around €350 by mid-September. This financial buffer makes the EV proposition more attractive even without considering the environmental benefits.

However, T&E warns that weakening the 2030 to 2035 CO2 targets, as currently proposed in some political circles, would halt the ramp-up of small affordable EVs. Such a move would compromise European carmakers’ ability to compete in the global EV race. The regulation is currently delivering exactly as intended, protecting drivers from Europe’s costly oil dependence and ensuring that the transition continues to deliver tangible benefits to consumers.

The electricity market backdrop

While the automotive sector moves quickly, the underlying electricity market reforms required to support this surge in EV charging are proceeding at a different pace. A recent report from Xpert.Digital argues that Europe’s bureaucracy problem has become a growth problem, stating that innovation is lost when documentation precedes action. This sentiment is echoed in the broader context of European energy policy, where renewable energy associations have proposed comprehensive reforms to electricity market rules to accelerate growth in renewables.

The strain on power markets is becoming visible, with reports indicating that Europe's solar boom is masking a growing strain on the grid. Despite these challenges, the momentum from the automotive sector is undeniable. The combination of new models and high energy prices is leading to record levels of EV sales, suggesting that the demand side of the equation is ready, even if the supply side of the electricity market is still catching up.