Automotive

The global automotive industry is entering a period of transition. In 2025, global car sales growth will have stabilised (+2% YoY) after rebounding in 2024, reaching near 90 million units.

The sector will continue to be affected by trade tensions between major economic blocs — the US, Europe and Asia. Since May, exports of cars and automotive equipment to the US have been subject to a 25% tariff, except for USMCA-compliant products from Mexico and Canada. In addition, the EU has imposed anti-dumping duties on Chinese electric vehicles, with import taxes ranging from 27% to 45.3% since October 2024. More recently, China’s restrictions on rare earth exports have further strained the automotive supply chain, as the country accounts for 90% of global refined rare earth production.

Last, the electrification of new car sales is expected to fragment even further in the coming months, with a notable gap already visible between the US (10%), Europe (25%) and China (45%). On the one hand, Donald Trump’s environmental deregulation agenda – embodied by his “drill baby drill” slogan – is unlikely to support EV take-up in the US, especially given his public fallout with Elon Musk, which could negatively impact Tesla’s domestic sales. On the other hand, EV sales in China continue to surge. Over the first nine months of 2025, nearly 11 million electrified vehicles were sold, marking a 35% YoY increase. Since September, EV sales have matched those of internal combustion engine (ICE) vehicles, signaling a major shift in market dynamics

Asia asserts itself as the nerve centre of the global automotive industry

Asia is the world's leading producer and consumer of vehicles, accounting for 25% of vehicle sales in 2023. Asian manufacturers dominate global sales (30 million vehicles sold in 2023), although there is considerable regional diversity. For the time being, the sector will be dominated by a long-established dual powerhouse composed of Japan and Korea. Toyota has been the world's leading manufacturer since 2020 (in terms of number of vehicles sold), over 5 million units sold in H1 2025. China has made a lightning breakthrough in the electric segment. It is now emerging as the future automotive hub of Asia. Other countries such as India and Vietnam have also made their mark in recent years.

China will continue to strengthen its position as the world's automotive powerhouse in 2024 thanks to EVs. It is the world's leading producer and consumer of electric cars – 11 million EVs have been sold in China last year, including two-thirds of Battery-EV. Just as mastery of the internal combustion engine was the key to the success of the US, European, and Japanese car industries, electric motorisation is now giving the Chinese car industry a comparative advantage.

In addition, the electric vehicle segment also supports Chinese car exports. Of the 5 million vehicles exported in the first nine months of 2025, around 35% were electric. The trend is set to continue in 2026.

However, this unbridled growth has come at the cost of substantial government subsidies and a fierce margin war between manufacturers. The result is a sector that is ultimately fragile as very few EV manufacturers are profitable, BYD being currently one of the few. Furthermore, support from Chinese authorities is creating a huge distortion in competition vis-à-vis foreign manufacturers.

US auto sector will be more resilient than in Europe

Given resilient demand, we anticipate a slowdown in production growth (+1 to 2% YoY) in the US in 2025, with sales expected to grow by 2 to 3% over the year. In Europe, we expect weak sector growth that was notably damped by a 1% decline in sales in 2025 (following a 2% drop in 2024).

In the European Union (EU), EVs are driving new registrations. EVs are expected to account for 25% of new vehicle sales in 2025 (BEV + PHEV), while from 2035 only BEVs will be allowed for sale in the EU. In the US, our forecasts are more cautious for the electric segment: the market share of electric vehicles is expected to remain close to 10% in 2025.

Nevertheless, these two car markets will remain largely dominated by internal combustion engines in the medium term. SUV sales account for around 50% of new car registrations in Europe. On the other side of the Atlantic, light trucks account for 80% of all new vehicle sales.

The US and the EU both seek to strengthen their industrial and technological autonomy

This involves first developing battery production capacity (Li-ion) and at the same time diversifying sources of supply of critical raw materials to escape the virtual Chinese monopoly.

In the US, under the Inflation Reduction Act (IRA), USD 65 billion will be invested over the next few years to develop gigafactories.

In Europe, regulations require European carmakers to produce only electric vehicles from 2035. The aim of the Critical Raw Materials Act (CRMA) is to develop European production and supply capacities for critical raw materials. To achieve this, the EU must acquire 10% extraction capacity, 40% refining capacity and 15% recycling capacity by 2030 (as a percentage of annual consumption). Progress is being made but the region is still a long way off from self-sufficiency.

Nevertheless, the transition to electric vehicles in Europe is not guaranteed. European manufacturers have notably secured an early revision of the 2035 agenda and its associated provisions from the European Commission (on 12 September). Their main objective is to postpone the deadline and extend the sale of plug-in hybrid vehicles (PHEVs) beyond 2035, arguing that weak demand and growing competition from Chinese manufacturers threaten European players—some, like Stellantis, are already under pressure