Investing.com -- Battery electric vehicle registrations in Europe rose 41% year-over-year in May, according to Jefferies analysis of European automotive markets. The penetration rate reached 23.6%, up 6.2 percentage points from the prior year.

The growth exceeded expectations and was supported by incentive programs in Germany, Italy, and France. Volkswagen lost battery electric vehicle market share, while Leapmotor, Tesla, and several Chinese automakers gained ground.

Plug-in hybrid electric vehicles increased 17% year-over-year in a sample of seven major European economies, reaching 11.2% penetration, up 1.3 percentage points.

Mercedes-Benz Group, Hyundai-Kia, Renault, and Toyota showed strong gains in battery electric vehicle penetration within their own sales. BYD appeared to shift toward plug-in hybrids within its product mix.

Jefferies noted that compliance with EU CO2 regulations should be the main factor driving battery electric vehicle sales in Europe from 2025 to 2027. Meeting the required 12% decrease in fleet CO2 emissions requires an estimated 5 to 7 percentage point expansion in battery electric vehicle penetration, even accounting for hybrids and other offsets.

EU compliance rules were amended on February 26, 2025, with the vote confirmed in June 2025. The changes introduced a three-year compliance period for automakers, replacing the previous annual requirement. Manufacturers can now average their CO2 emissions over 2025 to 2027, allowing them to offset shortfalls in one or two years with excess achievements in others.