Even with electric vehicle shipments projected to grow 17% in 2025, the deepening trade conflict between China and the West will create significant uncertainty in the electric vehicle market.

Gartner, which provides actionable, objective insights, has announced the major trends in the automotive market for 2025.

Gartner predicted that regulatory pressure on exhaust emissions and the trade dispute between Western countries and China will be key factors driving trends in the automotive industry this year.

“Software and electric vehicles will continue to be the main drivers of innovation in the automotive industry,” said Pedro Pacheco, VP analyst at Gartner. “This year, automakers will face uncertainty due to tightening emissions regulations and escalating trade tensions between China and the West, which will have a significant impact on the electric vehicle (EV) market in particular.”

Gartner forecasts that shipments of electric vehicles, including buses, passenger cars, vans, and large trucks, will grow 17% by 2025, and that by 2030, more than 50% of all vehicle models sold by automakers will be electric.

Meanwhile, uncertainty in the automotive industry is growing as discussions on vehicle emissions regulations are being revived due to changing political environments in the United States and the European Union (EU). Accordingly, some original equipment manufacturers (OEMs) may reconsider their electric vehicle-first strategy.

Trade sanctions against Chinese electric vehicles by the US and EU are also expected to be a major issue. Given that Chinese electric vehicles currently boast leading performance in connectivity, autonomy, software, and electrification (CASE), the potential implementation of these sanctions is expected to negatively impact automakers' adoption of Chinese CASE frameworks.

Currently, Chinese automakers enjoy a competitive edge in software and electrification through vertical integration and efficient development, enabling them to sell electric vehicles at lower prices than competitors. However, rising trade barriers could diminish these advantages, potentially shifting the landscape of the electric vehicle market.

“With drone manufacturers and Chinese telecom companies already feeling the impact of international sanctions, the robotics industry will not be immune,” predicted Bill Ray, senior vice president and analyst at Gartner.

He added, “As updates and intelligent software, remote-access cameras, and data collection in automotive business models become more widespread, geopolitical factors will further fragment the market and slow down CASE adoption.”

Traditional automakers have struggled to develop their own software development capabilities. Many have attempted to address this by signing contracts with Chinese OEMs and adopting their vehicle electrical/electronic (E/E) architectures, deepening their reliance on the software and hardware capabilities of Chinese EV manufacturers.

Furthermore, many automobile factories in Europe and North America have been facing overcapacity issues for several years. The recent increase in import tariffs on Chinese electric vehicles by the US and EU is expected to further exacerbate this problem. Accordingly, Chinese automakers are expected to establish factories in Europe, the United States, or countries with which they have free trade agreements, such as Morocco and Türkiye, to maintain price competitiveness.

Gartner predicted that if this situation continues, automobile factories with low operating rates will be closed or sold to other manufacturers, which will have a chain reaction that will lead to the closure of supplier factories, ultimately reshaping the automobile manufacturing landscape in the U.S. and Europe, and establishing low-cost countries as major hubs for automobile production and supply chains.