Electric vehicle (EV) shipments are projected to increase by 17 percent in 2025, a new report suggests. Gartner, Inc. highlights in a new paper several trends poised to influence the automotive industry as it navigates regulatory pressures on emissions and rapid growth from China.
The report forecasts that by 2030, more than 50 percent of all vehicle models marketed by automakers will be EVs.
“Software and electrification will remain the two main drivers of the automotive sector’s transformation. However, in 2025, automakers will face uncertainties regarding emission regulations and growing trade tensions between China and the West, particularly in the electric vehicle (EV) market,” stated Pedro Pacheco, VP analyst, Gartner.
The shifting political environment in the U.S. and European Union (EU) is reigniting discussions around vehicle emission regulations, creating a climate of uncertainty for the automotive sector. Consequently, some original equipment manufacturers (OEMs) may hesitate to prioritize EVs in their strategic plans.
Read more: Smaller, budget-friendly EVs key to adoption in emerging and developed markets
Geopolitics slows CASE adoption
Trade restrictions imposed by the U.S. and the EU against Chinese EVs are expected to hinder the adoption of connectivity, autonomy, software, and electrification (collectively known as CASE) in these markets. Chinese EVs are recognized as the most advanced vehicles available in these regions.
“Drone manufacturers and Chinese telecommunication companies are already feeling the impact of international sanctions, and robots are likely to follow,” remarked Bill Ray, Distinguished VP at Gartner. “The ubiquity of intelligent, updatable software, remotely accessible cameras, and the integration of data gathering into the automotive business model make it inevitable that geopolitics will fragment the market, thereby slowing adoption.”
Additionally, Chinese manufacturers maintain a competitive advantage in software and electrification, buoyed by vertical integration and efficient development processes, allowing them to produce advanced, cost-effective EVs. However, escalating trade barriers may undermine this edge, limiting the range of competitive EV options available to consumers.
OEMs expand software partnerships with Chinese OEMs
Established OEMs have found it challenging to enhance their internal software competencies. Consequently, many are forming partnerships with Chinese OEMs to tap into their vehicle electrical/electronic (E/E) architecture, thereby increasing their dependence on the software and hardware capabilities of Chinese EV manufacturers.
Overcapacity prompts OEM plant closures
Moreover, production overcapacity has long plagued numerous car factories in Europe and North America. The recent uptick in import tariffs on Chinese EVs imposed by the U.S. and the EU is expected to intensify this challenge. In response, Chinese automakers may establish manufacturing facilities in Europe and the U.S., or in free-trade partners like Morocco or Türkiye, to sustain competitive pricing.
Gartner further anticipates that this scenario will likely result in the closure or sale of several automotive factories operating at low utilization rates. This, in turn, will trigger a domino effect, leading to the shutdown of supplier factories. Such developments are poised to reshape the automotive manufacturing landscape in the U.S. and Europe, positioning low-cost countries as the primary hubs for automotive production capacity and supply chains.
