The world’s established carmakers are at a fork in the road. While they ponder what route to follow, brand-new upstarts are tailgating them aggressively, looking for an opportunity to overtake. One thing's for sure: 2025 will be a very tough year for some household names. 

In Europe, some carmakers have lost almost half their value. The situation isn’t much better in America, where legacy manufacturers are struggling to implement new technologies and stake a claim to the future. Meanwhile, China’s car industry is surging ahead, thanks to a raft of new homegrown brands, plentiful raw materials and burgeoning EV sales.

With the automotive sector crucial to everyone’s wider economic success, the stakes could scarcely be higher. Read on to discover the trends upending the industry and find out which automakers are en route to a bright future and which ones are stuck in a jam.

All dollar amounts in US dollars.

Several new trends define our motoring future. Most significant is that electric vehicles (EVs) will eventually become the norm as fossil fuel internal combustion engine (ICE) vehicles decline in number. This poses challenges to the established industry, which is having to redesign manufacturing processes and develop skills in emerging technologies, even as it grapples with the high fixed costs of older factories and working patterns, as well as debts and pension obligations. 

Pure EVs can cost up to 25% more to make, and they’re often less profitable than ICE or hybrid vehicles. Although this doesn’t affect big, high-value cars so much, it makes it harder for legacy companies to offer small, affordable mass-market vehicles. The withdrawal of subsidised prices in some countries has exposed this issue even more. 

Some seven million EVs were sold in the first half of 2024 – a 20% year-on-year increase – but the geographical distribution was very uneven. In some countries, the higher cost of EVs, combined with inadequate public recharging facilities and consequent ‘range anxiety’, means customer interest has stalled.

In some countries and US states, the authorities have set a date for banning new ICE cars in a bid to tackle climate change. Some also have mandatory targets for adopting EVs. For instance, the European Union says manufacturers must reduce the average emissions of cars they sell by 15% compared to 2021 levels or face steep fines. 

Some carmakers see these mandates as too much of a burden. Some national leaders do, too, with Italy’s leader Georgia Meloni describing them as self-destructive. The problem is that early subsidies to encourage EV sales are now being withdrawn, and many consumers seem reluctant to pay the full price. In the US, President Trump may remove a $7,500 top-up that’s been available under Joe Biden’s so-called Inflation Reduction Act. 

Forced to sell a product that isn't always in high demand, the car industry has to offer generous EV discounts that eat into profits or ration supplies of their more lucrative ICE vehicles. In Europe, some companies have added up to €500 ($525/£415) to petrol models, but this risks a sales slump across the board. 

There are various types of EV, including plug-in hybrids (PHEVs) and fuel cell EVs (FCEVs). Ultimately, the norm will probably be battery electric vehicles or BEVs. This presents further challenges for legacy carmakers. 

Assembly lines must be located close to battery factories because the immense weight of EV batteries makes it hard to transport high numbers of them over long distances. But, especially in Europe, battery manufacture hasn’t yet scaled up to the industry’s requirements. Some big ventures like Sweden’s Northvolt and the UK’s Britishvolt have gone bust. 

While global battery production will expand in the future, China is currently outpacing the West. The nation is pioneering cells that can recharge faster, hold more charge and perform better in cold weather. It dominates the supply chain of raw materials for EV batteries, has low energy prices and sometimes subsidises its manufacturers. In the BEV race, all this puts Chinese companies in pole position. 

The motor car has essentially been the same for over 100 years: a metal box on wheels with an engine, controlled entirely by the driver. Now even that is about to change as connected technology and the Internet of Things (IoT) take over. Cars will talk to other devices such as traffic signals, satnavs or other cars, improving journeys and enabling occupants to stay online while mobile. Tomorrow’s cars will be computers on wheels. 

All this could be great for consumers who'll have a wealth of communication, driver assistance and a more personalised experience at their fingertips. However, it will demand ever-increasing levels of digital specialism that legacy carmakers don’t naturally have. Expect to see more and more partnerships between vehicle builders and technology companies. However, the advantage will likely go to newer automotive firms that are digital-first and can offer bespoke IT solutions. 

There have been some embarrassing hiccups, but industry analysts still insist that self-driving cars will be routine... one day. A McKinsey survey in January 2024 predicted Level 4 autonomy (high driving automation) will be viable by 2030 and Level 5 (full driving automation) available for trucks by the year after. In the meantime, some pilot schemes are operating, and semi-autonomous driver assistance, such as Tesla’s Autopilot function, will grow ever more sophisticated.

Yet again, this entails huge investment in areas that vehicle builders might not be familiar with. Artificial Intelligence, sensing and cutting-edge software are all outside the usual capabilities of carmakers, who must work with third-party digital experts. However, this is less efficient than so-called vertically integrated operations, where everything is in-house and bespoke, designed for the task at hand. 

The natural trailblazers for autonomous vehicles would seem to be tech companies. As electric drivetrains make the mechanics of a car more straightforward, there will probably be less need to prioritise the engineering.

We might not even use cars in the same way before long. A Deloitte study suggests young people are becoming less enthusiastic about owning a vehicle or even leasing one long-term. It found that they prefer the convenience and predictable costs of subscription and sharing services instead. The car makers of tomorrow might offer mobility through services like hourly rentals as much as sales. 

That would also undermine an established pattern of operating via dealerships. Currently, these offer servicing, spare parts and extended warranties on behalf of manufacturers – a lucrative sideline which would disappear if people turned their back on the ownership model. 

In fact, even if significant numbers of motorists continue to own cars, the maintenance and dealership business seems set to crash. That’s because EVs have as little as 40% of the servicing needs of an ICE car, thanks to their vastly smaller number of working parts. Meanwhile, sales could easily go online with a direct buyer-to-manufacturer relationship and custom manufacturing, eliminating the middleman altogether. 

2025 could be a year of economic turmoil. With Donald Trump back in the White House, tariffs on imported cars might increase considerably. China has already been targeted, but Europe might also find itself in the crosshairs. Germany is especially concerned by the possibility of reduced access to the vast American market. In 2023, German automakers sold €23 billion ($24bn/£19bn) of cars to the US. That’s around 15% of all Germany’s exports.

And Europe itself is turning its back on free trade. In October, it slapped a 10% duty on all EVs and up to 45% on those coming from China. Again, Germany is the most worried and has officially opposed the policy. Its car exports to China are already being squeezed by cheaper local products, and any Chinese tariff retaliation would risk decimating its industry. 

Companies are now urgently reorganising to stave off the possible damage, with Chinese automakers setting up factories within the EU and Europeans reminding President Trump that they’re responsible for thousands of Stateside jobs as well as those back home. 

So, with all this frantic change, how are big car makers faring?

The world’s biggest carmaker by revenue, Volkswagen Group has expanded enormously over the years to include the eponymous VW plus brands like Audi, Seat and Skoda. It became a byword for mass-producing quality cars quickly and economically. But it’s now facing serious difficulties. 

VW's marques are highly exposed to the imminent internal combustion engine bans in Europe and domestic competition in China, which accounts for a third of their sales. Raised energy prices caused by Russia’s invasion of Ukraine have hit business too, and the group is shifting half a million fewer units than before the COVID-19 pandemic. That’s about two factories’ worth. Profits have crashed. 

In response, VW is mothballing EV factories and has only narrowly averted plant closures in its native Germany by wringing steep concessions from staff. Despite threats of widespread industrial action, over 35,000 jobs will go as part of efforts to save some €15 billion ($15.6bn/£12.4bn), while the workers who are left will give up bonuses and other payments. As VW accounts for nearly 40% of Germany’s 88,000 car workers, it’s a bellwether for the entire country. Sadly, the forecast is very unsettled. 

The world’s largest car manufacturer by volume of cars produced, with over 10 million sales a year, Japan’s Toyota is an electric pioneer, having introduced the first ever mass-produced hybrid, the Prius, back in 1997. Yet it’s become an outlier in its EV strategy, having been consistently more cautious about going all-electric than many rivals. 

Chairman and grandson of the company’s founder, Akio Toyoda, has said that an exclusively electric future would mean job losses among Japan’s five million auto workers, many of whom specialise in ICE technology. Another concern is that Japan relies on imports for much of its energy, which could make relying on BEVs unwise. Instead, Toyota has spent more time adding hybrid options to its models. It’s also been open to the possibilities of hydrogen power. 

This ‘wait and see’ approach attempts to cover all bases without the risk of gambling on just one of them. The company might be able to jump in any direction as the most successful technology becomes apparent. For now, the strategy seems to be working as well as anyone else’s. Though Toyota has suffered some quarter-on-quarter falls in earnings, it’s returned a full-year operating profit. 

Korea’s Hyundai is also playing a waiting game. The company has apparently accepted that BEVs will dominate the market in the future, but until the public recharging infrastructure is in place and battery costs fall, it’s decided to hedge its bets with a strategy it’s called 'The Hyundai Way'. This will focus on hybrids while also gently expanding the fully electric lineup. 

Planned innovations include what Hyundai calls an Extended Range EV, or EREV. This will be driven by an electric motor like a conventional BEV but also feature a small petrol engine to recharge the battery. It should have a range of around 900km, and Hyundai will assemble it in both the US and China, putting it on sale from 2027. Another advance will be to build battery cells into the body of cars, which the company says will reduce weight. Hyundai will explore autonomous driving technology up to Level 4, which is defined as almost full automation. 

Hyundai’s sister company Kia is also planning to expand its hybrid lineup, aiming for 58% of its sales, or some 2.5 million vehicles, to be either PHEVs or BEVs by 2030. 

It’s not been a great year for Stellantis. Profits have slumped, and shares are down by almost 40%. Formed by a 2021 super merger of Fiat-Chrysler and Peugeot SA, the Dutch-HQ’d company was the fourth largest by volume, and it returned record profits equivalent to almost $20 billion (£16bn) in 2023. So what's gone wrong? 

Stellantis was run by Carlos Tavares (pictured), who described himself as a ‘performance psychopath’. Under his management, the company traded aggressively, hence the bumper profits. However, car makers tend to record sales according to wholesale deliveries. And while the dealerships bought cars, retail customers didn’t follow suit. As a result, Stellantis has accumulated massive inventories of unsold stock, especially in the US. Tavares has since left the company and it’s yet to appoint a permanent replacement. 

As with other companies, Stellantis brands are struggling with the transition to EVs. Fiat’s electric 500e has seen production slowed or stopped several times in the last year, while an ICE van factory in Luton in the UK is closing. The company says that’s partly because of Britain’s EV mandate. On the plus side, Stellantis is investing $75 million (£60m) in a company called Factorial which makes potentially game-changing solid-state batteries. 

Detroit-based GM had planned a swift exit from making combustion engines and still has a declared aim of eliminating tailpipe emissions from its cars by 2035. However, early in 2024, CEO Mary Barra told investors that petrol-electric hybrids would be a stepping stone to this goal. GM is responding to weak American demand for BEVs as drivers worry about range, high prices, and the extent of public recharging facilities. 

Meanwhile, if electric powertrains are a headache for GM, other new technology has been too painful to bear. The company stopped funding its Cruise autonomous taxi subsidiary following an accident in 2023 when a pedestrian was dragged underneath one of the self-driving vehicles. GM had hoped Cruise would return revenues of up to $50 billion (£40bn) a year by 2030.  

In China, too, the company is facing headwinds. It’s partnered there with SAIC but its Chinese ventures made a loss of $347 million (£278m) in the first nine months of 2024 compared with a profit of about the same size the previous year. GM as a whole remains in the black, but like many legacy carmakers it’s facing challenges on multiple fronts. 

Shanghai-based SAIC is the largest of China’s state-owned car manufacturers, having scaled up within the world’s largest single market. It’s already a top 10 manufacturer by volume, responsible for making some five million vehicles, including brands like MG, Maxus and Roewe. And it’s now launched itself on the world stage. 

SAIC’s government ties have made it a prime target for protectionists in America, and in Europe, where its cars attract the highest tariffs of all – over 45%. But it’s determined to be a big global exporter nevertheless. To get around the trade barriers, it's begun manufacturing outside of China. For instance, a new MG plant in Thailand will source at least 40% of parts locally, so its output is technically Thai and not Chinese. There will be factories in Europe too. Meanwhile, SAIC enables Western companies GM and Volkswagen to sell their products in China through joint ventures there. 

As for the cars themselves, they’re usually electric but highly affordable, and they often undercut Western-made models. They benefit from China’s dominance of the battery industry. A new MG to hit forecourts in 2025 will feature a partly solid-state battery that's both lighter and more powerful than the conventional lithium-ion version and could offer a range of up to 1,000km. 

By contrast, Ford has had too few customers for its all-electric vehicles. The Michigan-based giant had expected to sell two million a year by 2026, but it’s now scaling back these plans after its electric business lost some $2.5 billion (£2bn).

In America, Ford scrapped a planned all-electric large SUV and postponed a new electric pickup truck until 2027. It’s put a new EV factory in Tennessee on ice and will reduce capital spending on BEVs from 40% to 30% of its investment budget. It will concentrate more on hybrid powertrains instead. Ford says it’s responding to customer demand, but it also hopes that by taking the transition to pure electric more slowly it can take advantage of forthcoming advances in battery technology. It’s moving some battery production from Poland to the US.  

Elsewhere, Ford is also encountering some difficulties, shutting down the autonomous driving project it ran jointly with Volkswagen and cutting 4,000 jobs in Europe over the next three years. That's 14% of its workforce. It says this is partly in response to EV mandates and it’s also asked the UK government to reintroduce incentives to buy EVs. 

Japan’s Honda has an ambition to sell only electric cars by 2040. It plans to spend the equivalent of nearly $70 billion (£56bn) on electrification over the next six years. But it’s also keeping its options open. CEO Toshihiro Mibe says that if demand for BEVs does not improve, the company still has the ability to hold off some of the investment. 

Whatever happens with its drivetrains, Honda intends to up its manufacturing game to match super-efficient newcomers like Tesla and Chinese automakers. Among other innovations it will introduce so-called gigacasting – casting giant components from a single piece of metal – and megacasting, which involves even bigger components. 

Perhaps the biggest development for Honda is the possibility of merging with fellow Japanese automaker Nissan. The two are said to be negotiating an understanding, hoping to withstand intense competition and share resources so they can take on Chinese competition. If it goes ahead, the deal would create a giant producing over seven million cars a year. It may not happen, but the fact it’s being considered shows that even Japan’s once invincible car makers are having to adapt to the new automotive landscape. 

Honda’s potential partner is currently a troubled carmaker. Its profits have fallen sharply off the back of a sales slump in the key markets of China and the US. It’s carrying record debt and hasn't kept pace with rivals in developing hybrid and electric vehicles. The immediate solution is to slash costs by a whopping $2.6 billion (£2.1bn) and restructure. Some 9,000 posts will disappear as production lines become more efficient, and even the CEO, Makato Uchida, is taking a 50% pay cut. 

Nissan was an early adopter of electric cars with its Leaf BEV (pictured), but today its lineup has stalled, crucially lacking a PHEV offer in the United States. It also suffered turmoil after the spectacular downfall of its celebrated former CEO, Carlos Ghosn, in 2017.

Since 1999, Nissan has partnered with Renault and Mitsubishi which has helped it build critical mass in this most investment-intensive of industries. Renault remains Nissan’s largest shareholder, but there are rumours it might reduce its stake, which would be a big problem for the Japanese company. On the other hand, Nissan’s talks with Honda could transform its fortunes. But it would not be a partnership of equals. Tellingly, Nissan shares have fallen, while Honda's have risen slightly. 

China’s most advanced carmaker, based in Shenzhen, accounts for 16% of the country’s vehicle sales and well over a third of the EV market. It now has its eyes on exports and could present a serious challenge to Western EV manufacturers struggling to keep prices down. BYD’s smallest BEV, the Seagull, sells for under $10,000 (£8k) in Latin America. It will arrive in Europe later in 2025.

BYD’s had quite a year. It sold 41% more vehicles than in 2023 and its third-quarter revenues even exceeded those of Tesla. At least half of BYD cars are hybrids, while Tesla only offers BEVS. 

White-hot competition in China means BYD can’t afford to be complacent. Desperate to preserve its domestic market lead, it’s reported to be demanding 10% price reductions from some suppliers in 2025. Meanwhile, Western tariffs might put the brakes on those foreign expansion plans.

Even several years ago, when most European carmakers were convinced of an imminent all-electric future, there was one refusenik. BMW preferred its so-called ‘power of choice’, which offered customers any drivetrain. Most of its ‘platforms’ – the vehicles’ technical foundations – were multi-energy rather than exclusively for a single power source. As BEV sales now plateau in some markets and grow in others, that flexibility seems to have paid off. Today, BMW’s ambition is for EVs to make up half its sales by 2030.

The company’s evolution towards electric cars progresses. This year will see the launch of its versatile Neue Klasse platforms, designed primarily for battery power. Six new BEVs will appear, using in-house designed batteries that promise longer range and faster charging. Most sales growth in future will be from the electric models. 

By retaining diversity, BMW’s bought itself time to perfect its electric offer, learning from experience and ironing out problems. It says it will stay flexible, with a place for ICE production well into the 2030s.

Mercedes-Benz sold almost 1.5 million cars in the first nine months of 2024, but this was 4.3% less than the previous year, and to keep its factories busy it needs to shift two million. The familiar culprits for its downturn were falling Chinese demand and disappointing EV sales.  

Four years ago, the company predicted it would be all-electric by 2030. It’s since rowed back on that, adopting a more flexible EV strategy prioritising the most receptive markets. There’s still disagreement within the company over strategy though; chief executive Ola Kaellenius favours concentrating on the most profitable luxury models to cut costs, while labour unions argue these are precisely the cars selling less well in a fast-moving Chinese market. They would prefer to chase higher sales volume overall.

One initiative that might help is a partnership in China with self-driving software developer Momenta. It’s the first time Mercedes has paired with a Chinese provider of key technology, but it’s hoping this will give it an edge over rivals. Mercedes has already won American approval to launch models with Level 3 autonomy, which allows a car to drive itself provided a driver can take over if needed. 

French company Renault was the only one of Europe’s ‘Big 5’ carmakers to have appreciating shares in 2024, thanks in part to its relatively light exposure to Chinese and US markets. Its ‘Renaulution’ strategy aims to transform the company’s business model to become, as it puts it, a next-generation automotive operation, focussed more on realising value and less on mere sales volumes.  

The idea is to become more vertically integrated – in other words, to have bespoke in-house supplies, while developing global vehicle platforms that can sustain different models across its marques, which include the eponymous Renault and Dacia. However, Renault lacks the size and resources of bigger car makers, so it also partners with others like Mitsubishi and Nissan, of which it’s the largest shareholder. 

There’s talk of Renault reducing its stake in Nissan. There’s also been talk of a merger with Stellantis. Both sides have denied the rumour.  

Tesla has the explicit aim of being a technology company as much as a vehicle builder. As such, it’s a disrupter, bringing radical innovation to the sector and a serious challenge to established players. Enjoying high vertical integration of supplies, cutting-edge efficiency and the deep pockets of Elon Musk, it’s riding the wave of automotive change. 

While other EV makers plead for subsidies, Musk says he would welcome their withdrawal in the US. He can afford to make less profit on each car if it forces rivals out of the market. Similarly, Tesla is engaged in a ferocious price war with BYD in China, seemingly happy to sacrifice margins for market share. In January 2024, its Model Y became the bestselling BEV ever, as well as the world's bestselling car of any fuel source.  

Yet Tesla’s had some problems. Over the whole of 2024, its output actually reduced slightly for the first time since 2011. Meanwhile, production of its new Cybertruck has been halted more than once. And its Cybercab – a driverless taxi that will cost under $30,000 (£24k) and enable Tesla to enter the ride-sharing business – is scheduled for 2026, but the date keeps slipping. In April 2024, the company laid off 10% of its workers, proving that in today’s turbulent car industry, even the frontrunners can encounter headwinds. 2025 could see its fortunes boosted by the launch of the revised Tesla Model Y, as well as the rumoured launch of the smaller, cheaper Model Q.

The Indian conglomerate Tata owns British carmaker Jaguar Land Rover (JLR), which makes Land Rover premium SUVs and Jaguar sports sedans. JLR has had considerable success over the years, especially with its Land Rover and Range Rover brands, but like all legacy car makers, it’s now having to adapt to a fast-changing world. 

For Land Rover, this means fending off competition at home from its own Chinese business partner, Chery, which will enter the British market with a cheaper SUV under its upscale Jaecoo brand next year. Meanwhile, Land Rovers and Range Rovers depend heavily on American sales, so they’re particularly vulnerable to the threat of US tariffs. The new fully electric Range Rover should launch in 2025 to complement current hybrid offerings.

As for Jaguar, it’s junking powerful petrol cars and embracing an all-electric future from 2026. Future models will be aimed at a younger and even more affluent market. The new strategy has aroused controversy, with critics accusing the company of ditching its heritage and existing customer base. The idea is to sell fewer vehicles but make higher profits on each one. As they might sell for around $190,000 (£150k), it’s a bold move indeed. We’ll see whether the ‘Big Cat’ leaps toward a more secure future or risks extinction. 

Jaguar might be about to jump headlong into an electric future but across the North Sea, Swedish brand Volvo is yet another company backpedalling from the idea. Three years ago, it said it would only make electric cars by 2030. Now it plans to keep selling some hybrids, and some of these could even be mild hybrids that have an internal combustion engine assisted by additional electric power. 

As with Ford and GM, part of the reason for Volvo’s U-turn is the variable appetite for BEVs, as scarce public charging points and higher prices deter some customers. Another problem is that the company is owned by Chinese carmaker Geely, and many of its cars are made in China. That means it’s hit by European Union, American and Canadian tariffs on Chinese EVs.

Volvo remains committed to electrification in the long run. But it says it recognises that the path toward completely phasing out combustion engines will not be linear. In other words, there will be peaks and troughs along the way. 

A subsidiary of Volkswagen, Porsche is one of those most badly affected by the downturn in Chinese sales. It’s also having trouble with its transition to electric drivetrains. The upscale German marque had ambitions for 80% of its products to be EVs by the end of this decade. However, it now says it's sticking with petrol for “much longer”. 

Porsche has been stung by the lacklustre uptake of EVs in some countries. Sales of its electric Taycan model are down 50%. Overall, the company saw a 40% drop in new cars delivered in the first nine months of 2024. 

One issue is that buyers of performance cars might be reluctant to give up the character and user interaction that go with a combustion engine. Batteries make vehicles heavy and – some say – less thrilling to drive. One way forward might be carbon-neutral synthetic fuels, which Porsche is trialling in Chile and hopes to make available by 2030.  

Another expensive badge under the VW umbrella, the British luxury carmaker Bentley is also finding an electric future more challenging than it first assumed. It originally planned to go all-EV by 2030. That date’s now slipped to 2035, and its first EV model won’t appear until 2026, one year later than planned. 

New CEO Dr Frank-Steffen Walliser – who, incidentally, moved over from Porsche – has stated there’s not much enthusiasm for electric cars among the present customer base. He’s also pointed out that the market for them will develop at different speeds in different countries. 

That said, Bentley is still pursuing a greener future. It retired its legendary six-litre W12 petrol engine in July last year and replaced it with a hybrid petrol-electric drivetrain using a mere V8 combustion unit. The new arrangement, though emitting far less CO2, will, in fact, have even more power. 

As these examples clearly demonstrate, the car industry is undergoing a massive shake-up. The biggest challenges are likely to be how to electrify while some key markets seem reluctant to play ball, and how to fend off competition from new players, especially those from China. Will Chinese EV makers leapfrog their older and sometimes less agile Western rivals?

If they do, the West is in for a shock. The automotive sector is vital for many national economies and supports employment far beyond car factories themselves. The turmoil of 2024 is already causing significant job losses in supply chains. In Germany, steelmaker Thyssenkrupp is cutting 40% of its workforce and other suppliers have axed 20,000 positions between them. The Bosch automotive division will shed 8,000 jobs globally. 

We're likely to see some dramatic changes in the years to come, with some companies merging or taking over others, and some meeting their end. However it pans out, the consequences will be hard to ignore. This matters for everyone.

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