Energy volatility could fast-track global EV adoption to 50% above base case, Wood Mackenzie finds

China leads with 29.9M in annual sales by 2040, US must make bolder bets on EV technology to keep pace

LONDON/HOUSTON/SINGAPORE, Aug. 13, 2026 (GLOBE NEWSWIRE) -- INSIGHT FOR IMMEDIATE RELEASE

Wood Mackenzie | www.woodmac.com

LONDON/HOUSTON/SINGAPORE, 13 August 2026 - As the Middle East conflict continues to drive volatility in global oil markets, Wood Mackenzie's base case already projects EVs jumping from 4% of the global fleet today to 25% by 2040.

But the firm's latest Horizons report identifies three factors that could jolt EV sales even higher: governments boost EV supply chain investment to strengthen resilience to oil market shocks, high fuel prices prompt more consumers to switch to EVs and EV technologies advance faster than expected.

"If these forces converge all at once, the effect on EV adoption could be dramatic," said David Brown, Director, Energy Transition Research at Wood Mackenzie. "Our electric shock scenario models what happens when policy, consumer behaviour and technology all move in the same direction, quantifying the implications for commodities and power markets."

According to the Horizons report, "Electric Shock: How electric vehicles could hit the accelerator", this "electric shock" scenario could see global oil demand fall to 99 million barrels per day (mb/d) by 2040, 5 mb/d below the base case and roughly its current level, potentially leading to the early closure of around 40 oil refineries worldwide.

China in the lead

China is the global leader in EVs, reaching 42% of Chinese car sales in Q2 2026, up from 33% just a year earlier. The electric shock scenario would accelerate that momentum further. Additional Chinese policy measures including new restrictions on gasoline consumption, full purchase tax exemptions and larger purchase credits could cut the total cost of ownership for EVs by about 30%, pushing annual sales from 8.9 million in 2025 to 29.9 million by 2040. Chinese EV manufacturing capacity could grow by 50% by 2035, with cost advantages enabling aggressive expansion across the Global South.

The US: at risk of falling behind

The contrast with the United States is stark. Without advanced battery technologies and competitive supply chains, the US auto sector risks ceding its home market to international competitors and falling behind internationally. US passenger EV sales in the first five months of 2026 were down 33% from the same period of 2025 following the withdrawal of tax incentives, and EVs currently make up just 3% of the vehicle fleet.

Under the electric shock scenario and facing a growing wave of EVs globally, US policy responds decisively with targeted policy support that could attract foreign direct investment into EV supply chains and new greenfield plants deploying modular technologies. These measures could bring EV total cost of ownership parity with gasoline vehicles forward to 2031, two years ahead of the base case, leaving the US EV fleet 51% larger than the base case by 2040.

Europe: a grand bargain

Europe enters this scenario with strong decarbonisation ambitions but significant headwinds, some 60,000 auto sector layoffs were announced in 2026 alone. The electric shock scenario assumes a "grand bargain" for Europe: trading tariff relief for Chinese investment in local manufacturing, protecting jobs while accelerating the EV transition. The result could be a European EV fleet 53% larger than the base case by 2040.

The investment challenge: minerals and infrastructure

Wood Mackenzie estimates that an additional US$45 billion in greenfield metals supply over the next decade would be sufficient to support the accelerated EV growth projected under the scenario.

Copper is the most critical bottleneck. Annual mine capacity additions would need to rise from around 850,000 tonnes per year, the long-term average, to approximately 960,000 tonnes per year through 2040, requiring roughly US$25 billion of that additional investment.

Much of that capital would need to flow into higher-risk jurisdictions including Argentina, the Democratic Republic of Congo and Pakistan. If established mining regions such as Chile, Peru and the US fail to streamline permitting and maintain competitive fiscal terms, a larger share of future growth will shift toward state-backed Chinese entities, deepening Western supply chain exposure.

Charging infrastructure presents a parallel challenge, but one that can be managed

To accommodate higher power demand from EVs, countries will need to expand managed charging: programmes that shift charging to times when the grid has ample supply and costs are lowest.

If electricity suppliers and regulators can shift EV charging to periods of ample power supply, grids can be kept stable and charging costs competitive even as power demand from EVs rises.

In western Europe, 50% of EV charging is already managed in this way. Under the electric shock scenario, that proportion rises to 85% across Europe by 2040. The US, where managed charging currently accounts for just 5% of sessions, would need to follow suit to keep pace with accelerating EV adoption.

The world's 7 million public charging ports currently sit at just 15% utilisation, but the electric shock scenario would consume that slack quickly. China would require an additional 4 million ports by 2040, representing roughly US$200 billion in incremental investment. Europe would need an extra US$108 billion to build 2.7 million additional ports above the base case.

Conclusions

"Geopolitics, consumer behaviour and technological innovation could converge to lift EV sales faster than in our base case," said Brown. "For OECD countries, securing critical mineral supplies and technological know-how over time will deliver lasting strategic advantage. Battery supply chains could be particularly important in light of the surge in demand for energy storage resulting from the global artificial intelligence (AI) boom."

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Wood Mackenzie is the global leader in analytics, insights and proprietary data across the entire energy and natural resources landscape. For over 50 years our work has guided the decisions of the world's most influential energy producers, utilities companies, financial institutions and governments. Now, with the world's energy system more complex and interconnected than ever before, sector-specific views are no longer enough. That's why we've redefined what's possible with Intelligence Connected: the fusion of our unparalleled proprietary data with the sharpest analytical minds, all supercharged by Synoptic AI, to deliver a clear, interconnected view of the entire value chain. Our trusted team of 2,700 experts across 30 countries breaks siloes and connects industries, markets and regions across the globe to empower our customers to identify risk sooner, spot opportunity faster and make every decision with complete confidence.

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