2025 Automotive Outlook: What Will Drive the Industry Forward?
2025-03-13
Table of content
- Industry at a Crossroads
- The Road to Full Autonomy
- Changing Vehicle Lifespans
- From Steering to Streaming
- The Chinese EV Invasion
- Old-School OEMs: Evolve or Fade
- Price Wars Ahead
- The EV Paradox
- US-EU Trade Wars
- RSB: Your Partner in Automotive Evolution
Industry at a Crossroads
The automotive industry stands at the crossroads of transformation. With rapid technological advancements, shifting regulatory landscapes, and evolving consumer expectations, 2025 is set to be a defining year. The transition to electric vehicles (EVs), the rise of software-defined cars, supply chain disruptions, and the push for sustainability are just some of the key factors shaping the future. But how will the industry adapt to these challenges, and what strategies will define the leaders of tomorrow?
In this article, we explore the key trends that will shape the automotive sector in 2025, analyzing the challenges they bring and how companies can turn them into opportunities. From technological advancements to regulatory shifts, and from evolving vehicle architectures to the varying approaches in Europe, the USA, and China, let’s take a closer look at what the future holds and how the automotive industry can stay ahead of the curve.
The Road to Full Autonomy
While Level 5 autonomous vehicles are still a few years away, advancements in AI-driven ADAS, sensor fusion, and LiDAR technology are already reshaping the industry. These innovations are paving the way for a future where self-driving cars can operate without human input.
If Level 5 autonomy becomes mainstream, it could transform vehicle ownership, shifting from individual ownership to fleet-based models like robotaxis and subscription-based mobility services. This shift would change how cars are used, moving away from personal assets to shared, on-demand resources.
For automakers, this presents a challenge. Companies relying on traditional sales models may struggle as pay-per-use mobility and car-sharing rise. Shifting to a model based on mobility services rather than vehicle sales will require significant changes in business strategy.
However, there are bottlenecks to overcome. Regulations will slow down the approval of full automation, consumer acceptance remains uncertain, and infrastructure will need major upgrades to support autonomous fleets. Despite these challenges, the industry is moving toward a major transformation.
Changing Vehicle Lifespans
The rise of autonomous vehicles will fundamentally shift how cars are maintained and replaced. Unlike traditional privately owned vehicles, which are designed for long-term use, autonomous fleets will prioritize uptime over longevity. This means that instead of focusing on extending a vehicle’s lifespan through regular maintenance, fleet operators will opt for frequent renewals, replacing vehicles more often to ensure maximum efficiency and reliability.
For automakers, this shift presents a financial opportunity – higher turnover rates translate to more production cycles and a steady demand for new vehicles. However, the impact on traditional service and repair networks could be significant. Since autonomous EVs have fewer moving parts and require less mechanical maintenance than internal combustion vehicles, independent repair shops and dealerships that rely on servicing may face declining revenues. As the industry moves toward predictive maintenance and software-driven diagnostics, the role of aftermarket services will need to evolve to stay relevant in this new automotive ecosystem.
From Steering to Streaming
As self-driving technology continues to advance, the focus of the automotive experience will shift from traditional driving elements like steering and acceleration to in-car digital experiences such as entertainment, productivity, and connectivity. With vehicles no longer requiring constant human control, infotainment systems will become the primary feature for drivers and passengers alike.
Automakers will increasingly find themselves competing with tech giants like Apple, Google, and gaming companies to dominate the in-car software ecosystem. The race to create the most engaging, intuitive, and seamless experience will drive innovation in how we interact with our vehicles.
In this new environment, subscription-based services – such as premium infotainment, cloud services, and over-the-air updates – will become critical sources of revenue for automakers. But how will car companies balance the need for innovative tech while maintaining their traditional automotive identity? The shift to infotainment dominance raises important questions about the future of vehicle design and consumer expectations.
source: www.market.us
The Chinese EV Invasion
It’s impossible to ignore that the automotive industry is facing one of its biggest challenges yet: the rise of Chinese electric vehicle manufacturers. Companies like BYD, Nio, XPeng, and Geely are rapidly expanding in Europe, offering affordable, high-quality models that are increasingly competitive with European brands. Their success is driven by advanced battery technology, particularly LFP chemistry, which delivers lower costs and better safety compared to traditional lithium-ion batteries. This innovation allows Chinese automakers to undercut European prices, putting significant pressure on local manufacturers. Just take a look at the chart below, which highlights the rapid growth of Chinese EV sales in Europe over the last few years, showcasing their increasing market share and competitive edge.
European companies, once enjoying a pricing advantage, are now forced to adapt as Chinese brands gain market share. To stay competitive, they must either lower prices or invest in improving technology. In response, countries like Germany, France, and Italy may introduce trade barriers to protect their local industries, but this could create friction with China and complicate global trade. European automakers now face the urgent challenge of maintaining their position in a market increasingly dominated by China’s affordable EV offerings.
Old-School OEMs: Evolve or Fade
The automotive world is changing at an unprecedented pace, and legacy automakers like Volkswagen, BMW, Mercedes, Stellantis, and Renault are feeling the pressure. With Chinese EVs flooding the market at competitive prices, these well-established brands are facing an uphill battle to stay relevant. While they may struggle to compete on price, their best chance for survival could lie in doubling down on brand loyalty, luxury design, and unmatched safety features that have long defined their reputation.
Some automakers are already making bold moves to preserve profitability – take Ford, for example, which has been scaling back its presence in Europe to focus on more profitable opportunities back home in the U.S. But price isn’t the only challenge. In a world where vehicles are becoming increasingly digital, partnerships with tech giants like Google, Qualcomm, and NVIDIA could prove to be game-changers. The future of software-defined vehicles will demand innovation beyond traditional automotive engineering, and those who fail to adapt may find themselves left behind.
Price Wars Ahead
The shift to electric vehicles (EVs) has sparked a wave of competition, and price wars are becoming inevitable. As more automakers jump into the EV market, the pressure to offer competitive prices is growing. Tesla, known for its aggressive pricing strategy, has already forced competitors to rethink their margins. By slashing prices, Tesla has not only raised the stakes but also intensified the competition, with other brands scrambling to adjust their pricing in response. This dynamic is clearly reflected in Tesla’s shrinking gross profit margins, as shown in the chart below.
source: www.statista.com
This trend is leading to commoditization of EVs, where price becomes a major differentiator rather than technological innovation or features. As a result, traditional OEMs will need to find cost-optimization strategies that allow them to stay profitable while maintaining competitiveness. For many, the focus will shift to improving manufacturing efficiency, cutting production costs, and leveraging software services or subscription models to generate additional revenue streams. Those who fail to adapt risk seeing their profit margins shrink as the market becomes flooded with budget-friendly electric options.
The EV Paradox
To be honest, it’s hard to understand what the EU is really aiming for with its green policies when you look at the full picture of EV production. The transition to electric vehicles (EVs) is meant to reduce carbon emissions and contribute to a cleaner future, but there are some serious contradictions in the process. While pushing for a sustainable shift, the environmental cost of battery production – like the mining of rare-earth materials, the energy consumption in manufacturing, and the environmental footprint of battery disposal – raises valid concerns. It’s difficult to see how these practices align with the EU’s lofty sustainability goals.
On top of that, Europe’s high electricity prices are making EV charging far more expensive than originally projected. What seemed like an affordable transition for consumers now looks a bit less rosy, potentially slowing down adoption rates and complicating the EU’s ambition to become a leader in green mobility.
One of the main debates centers around battery technology. The choice between Lithium Iron Phosphate (LFP) and Nickel Manganese Cobalt (NMC) batteries is crucial. LFP batteries are cheaper, last longer, and are safer, but their lower energy density limits range. NMC batteries, on the other hand, provide better range but come with sustainability concerns due to the environmental impact of cobalt mining.
source: www.mayfield.energy
While the EU seems to favor NMC for its higher energy density, China is betting on LFP technology to dominate the market. This contrast between the EU’s goals and the realities of EV production makes it difficult to pinpoint exactly how “green” the EV revolution really is. It’s a complex situation that raises more questions than answers about what true sustainability in the automotive industry should look like.
US-EU Trade Wars
The growing trade tensions between the US and the EU could significantly alter the competitive landscape for automakers on both sides of the Atlantic. As tariffs rise, automakers that rely heavily on international trade may struggle to maintain profitability. For European manufacturers, this could present an opportunity to strengthen their position domestically, as higher tariffs on US imports may make American brands like Tesla and Ford less price-competitive in Europe. However, this shift could also complicate the market, particularly if the EU retaliates with tariffs on Chinese electric vehicles (EVs), further intensifying the competition.
As these changes force automakers to reconsider their supply chains, pricing strategies, and global presence, the path forward remains uncertain. The evolving tariff landscape will challenge companies to stay agile and adaptable, with the added pressure of rising costs. Will automakers be able to navigate these unpredictable dynamics, or will they struggle to maintain profitability? Only time will tell.
RSB: Your Partner in Automotive Evolution
The automotive landscape is changing faster than ever, and companies must be ready to pivot at a moment’s notice. Whether it’s adapting to price wars, embracing autonomous driving, or finding new solutions to global trade challenges, the road ahead isn’t just uncertain – it’s filled with both risk and opportunity.
At RSB Automotive Consulting, we’re not just watching these shifts happen from the sidelines. We’re actively helping businesses build the teams that will drive the automotive revolution forward. The future belongs to those who can adapt, innovate, and keep pace with change – and that’s exactly where we come in.
So, as the industry accelerates towards 2025 and beyond, one thing is clear: the time to act is now. If you’re ready to navigate the complexities of this transformation and bring RSB’s expertise into your business, don’t hesitate to get in touch: RSB Meeting. Let’s shape the future of automotive together.
Sources:
Buchholz, K. (2024). Infographic: Tesla Profit Margins Shrink in 2024. Statista Daily Data. Infographic: Tesla Profit Margins Shrink in 2024
Comparing NMC and LFP Lithium-Ion Batteries for C&I Applications — Mayfield Renewables. Mayfield Renewables. Comparing NMC and LFP Lithium-Ion Batteries for C&I Applications — Mayfield Renewables
In-Car Infotainment Market. (2024). Home . In-Car Infotainment Market
Litman, T. (2024) Autonomous Vehicle Implementation Predictions: Implications for Transport Planning. Victoria Transport Policy Institute, Victoria.
One in four EVs sold in Europe this year will be made in China –… (b. d.). T&E. One in four EVs sold in Europe this year will be made in China –…
