Gartner has identified a range of trends that are expected to shape the automotive industry in 2025. The sector is navigating challenges including evolving emission regulations, geopolitical tensions, and a significant shift toward electrification and software integration, according to a new report released by the company.
Pedro Pacheco, Vice President Analyst at Gartner, emphasized that software and electrification will continue to drive industry transformation. However, uncertainties surrounding emission regulations and trade tensions between China and Western countries may hinder progress, particularly in the electric vehicle (EV) market. These uncertainties have caused some automakers to hesitate in prioritizing EVs within their strategies.
Gartner forecasts a 17% increase in EV shipments in 2025, encompassing buses, cars, vans, and heavy trucks. The firm predicts that by 2030, over half of all vehicle models marketed by automakers will be electric. However, geopolitical factors are expected to impact the adoption of connectivity, autonomy, software, and electrification (CASE). Trade barriers imposed by the United States and European Union against Chinese EVs could slow innovation and market penetration in these regions, despite Chinese automakers’ advancements in software and electrification.
Bill Ray, Distinguished Vice President at Gartner, noted that international sanctions have already affected sectors such as drones and telecommunications, with similar trends anticipated for robotics and other high-tech industries. Ray highlighted that the integration of software, remote monitoring systems, and data gathering into the automotive business model makes geopolitical fragmentation an inevitability.
Chinese automakers, supported by vertical integration and efficient development processes, have maintained a competitive edge in delivering advanced and affordable EVs. However, increasing trade restrictions could undermine their competitive advantage, reducing the diversity of EV options available to consumers. In response, legacy automakers are forging partnerships with Chinese OEMs to access their vehicle electrical and electronic architectures, deepening reliance on their technological expertise.
Overcapacity in production has been a persistent challenge for European and North American car factories, a situation exacerbated by heightened import tariffs on Chinese EVs. To mitigate these pressures, Chinese automakers are considering establishing factories in regions like Europe, the United States, and free-trade partners such as Morocco or Turkey. These developments are expected to shift automotive production hubs toward low-cost countries. Gartner anticipates that production inefficiencies will lead to the closure or sale of underutilized factories, with a ripple effect extending to supplier facilities, ultimately reshaping the manufacturing landscape across the US and Europe.