2025 Automotive Industry Key Trends
Gartner has highlighted several key trends that will shape up the automotive sector in 2025 as the industry faces regulatory pressures on emissions and strong growth from China.
Pedro Pacheco, Gartner Vice President for Research, said, “Software and electrification will continue to be the two main drivers of automotive transformation. However, this year, automakers will face regulatory uncertainty and rising trade tensions between China and the West, particularly, in the EV markets.”
The changing political landscape in both the United States and the European Union (EU) has brought the issue of vehicle emissions regulation back into the spotlight, thus, creating uncertainty for the automotive industry, and causing some OEMs to probably be hesitant on resting their primary business strategy with EVs. Electric vehicle (bus, car, van and heavy truck) shipments are estimated to grow 17% in 2025, and by 2030, more than half of all vehicles sold and marketed by manufacturers are expected to be EVs.
Geopolitics Slows Down Adoption of CASE Concepts
Trade barriers imposed by the United States and the European Union on Chinese EVs will slow down the adoption of connectivity, autonomy, software and electrification technologies or collectively called CASE technologies in both regions, as Chinese EVs are the most advanced vehicle category in the industry.
Moreover, Bill Ray, Gartner Senior Vice President, disclosed that, “Chinese drone and telecom manufacturers are feeling the effects of trade restrictions, and robotics are next,” “With intelligent, updatable software, remotely accessible cameras and data integration into the automotive business model, geopolitical challenges are inevitable that will further divide the market and slow down the adoption of these technologies.”
Chinese automakers have a competitive advantage in software and electrification, with their specialized and efficient development approach enabling them to offer efficient and affordable EVs. However, rising trade barriers could erode these advantages and reduce the variety of EVs available to consumers.
OEMs Expand Software Collaboration with Chinese OEMs
Contracted manufacturers are struggling to develop the in-house software capabilities eventually resulting in many of them to have to turn to Chinese OEMs in order to gain access to the vehicle’s Electrical/Electronic (E/E) architecture, thus, making the reliance on Chinese EV manufacturers’ software and hardware capabilities being inevitably increased.
Excessive Capacity Drives OEM Plants’ Closures.
Excessive capacity has been a challenge for many automotive plants in Europe and North America for years. The recent tariffs on Chinese EVs by the US and EU are likely to exacerbate this problem. To cope with such problem, Chinese automakers may relocate their plants in Europe and the US, or in free trade partners such as Morocco or Turkey, to maintain their competitive pricing.
This situation results in Gartner’s expectation that there is a potential trend to lead to the closure or sale of many underutilized automakers, to other automakers, with an eventually ripple effect that could lead to supplier plant closures. This issue will re-orient the US and European automakers and make low-cost countries become the hubs and main supply chains of automotive industry.
