Vehicle manufacturers are facing challenges due to the rapidly changing US trade policies, particularly the increase in import tariffs on new vehicles and components to 25%. This has led global automakers, including US giants GM and Ford, to rethink their business strategies and implement new plans to protect their positions in the US market, the second-largest auto market in the world.
As a result of these changes, many automakers have revised their earnings forecasts for the current year and beyond. The latest US sales data indicates that the initial rush to purchase vehicles before the tariff hike has subsided, and analysts predict a further slowdown in the US vehicle market in the second half of the year.
In Western Europe, the passenger vehicle market saw a 6% decline in sales in June, with a selling rate of 11.6 million units per year. Overall, the first half of 2025 has been challenging for the automotive industry in Europe, with year-to-date sales down over 1% compared to the previous year.
On a global scale, automotive OEM margins have continued to decline, reaching 5.4% in the first quarter of the year, a significant drop from their peak in 2021. Bain & Co warns that these margins may decrease further in the coming years due to inflation, high interest rates, subdued demand, rising costs, and falling prices. This situation is exacerbated by the transition to producing both combustion engine vehicles and electric vehicles simultaneously.
In China, the largest car market in the world, passenger vehicle retail sales rose by 18% in June, driven by subsidies and a price war among manufacturers. The market dynamics in China are complex, with numerous OEMs and brands vying for market share.
The rise of autonomous vehicles is another topic of interest in the automotive industry, with guest contributor Antoni Grau discussing Europe’s readiness for autonomous vehicles. As technology continues to evolve, the industry must adapt to meet the demands of the future.
One eyebrow-raising development is the entry of lesser-known brands into new markets, such as Chery’s expansion into the UK with Omoda and Jaecoo. Similarly, Avatr, a brand owned by Changan, is set to enter a major North African market, highlighting the global reach of Chinese automakers.
In conclusion, the automotive industry is facing a period of significant change and challenges, driven by shifting trade policies, market dynamics, and technological advancements. Manufacturers must adapt quickly to stay competitive in this rapidly evolving landscape.
