Industry Analysis: Automotive Trends in 2025
This article discusses key trends to track changes in automotive manufacturing throughout 2024 and beyond. A Valona analyst wrote this report using Valona's platform.
Key trends impacting automotive manufacturing
By 2030, we expect 90% of new cars will be built for connectivity. Technological advances in these areas are completely reconstructing the way we think of automotive manufacturing. Here’s an at-a-glance look at what to expect and how to prepare.
By the end of this analysis, you will have a jumping off point to better understand CASE, or following trends for vehicles:
- Connectivity
- Autonomous
- Shared & Services
- Electrification
Read on to learn more about the challenges and opportunities driving this evolving sector forward.
1. Connectivity and the Internet of Things
What is it?
Vehicles capable of ‘communicating’ with each other and the surrounding infrastructure. IBM is jumping through hoops to produce smart vehicles that not only promise enhanced safety with advanced assistance systems, but also allow predictive maintenance and personalized services.
Why are companies heading this way?
Connectivity opens avenues for rapid innovation, economic viability, and business differentiation. Enhanced data collection can lead to more optimized vehicle design and higher efficiency. This approach leads to better fault prediction and improved safety
How does this affect the industry?
In 2022, connected car sales surpassed non-connected car sales for the first time. The industry is set for a surge with a 17% CAGR, reaching approximately 367 million connected vehicles in service globally by 2027.1 McKinsey predicts that 95% of new vehicles sold will be equipped with advanced connectivity capabilities by 2030. Connectivity will pave the way for increased cross-industry collaborations and new business models.2
What can you do to prepare?
- Invest in smart car technology and trends. Companies like BYD Auto have invested upwards of €14 billion in smart car technology. Investments in connectivity elevate competitive stance in the market while catering to emerging customer needs.3
- Research in-house capabilities – for example, Volkswagen uses software architectures developed by Cariad, a software company focused on automotive applications, allowing them to open the door to unique offerings and differentiation.
- Consider strategic acquisitions to quickly acquire technological skills or resources by buying businesses that hold them. Magna International’s acquisition of Veoneer’s Active Safety business from SSW Partners is a prime example, it allows them to integrate advanced driver-assistance systems quickly and directly into their operations.4
“McKinsey predicts that 95% of new vehicles sold will be equipped with advanced connectivity capabilities by 2030.”
2. Autonomous and automated vehicles
What is it?
A transition from human-operated vehicles to self-driving or driverless ones powered by intricate networks of sensors, cameras, and advanced software. Companies like Waymo, a subsidiary of Alphabet Inc. (Google), operate autonomous rideshare services in select areas using self-driving cars. These companies are a harbinger of how autonomous driving can redefine our traveling experiences.5
Why are companies heading this way?
New revenue streams, including high-margin profits of on-demand mobility services. Evolving consumer demands and macroeconomic factors such as urbanization also increase the attractiveness of selfdriving vehicles. These vehicles promise enhanced safety, improved fuel efficiency, comfortable commutes, and efficient use of time.
How does this affect the industry?
As many as 3.5 million autonomous vehicles could be on U.S. roads by 2025, and this could swell to 4.5 million by 2030. The increasing adoption of autonomous driving capabilities is reshaping the entire automotive industry. Advanced autonomous technologies compel manufacturers to reconsider their vehicle designs, assembly processes, and resource allocation for training specialized workforces.6
What can you do to prepare?
- Overcome technological obstacles. 45% of executives view technological challenges as a significant roadblock to autonomous technology. Companies must push their organizations to actively upgrade in-house capabilities or seek external assistance. Actively monitor ongoing technological innovations in AI, machine learning, and vehicle-to-everything communications.7
- Prepare for New Business Models: Focus on how services like automobile leasing and ridesharing affect the long-term strategy and revenue potential for manufacturing businesses, with the decline in individual car ownership. Conduct regular audits of evolving patterns, regulations, and consumer behaviors tied to shared mobility modes.
“As many as 3.5 million autonomous vehicles could be on U.S. roads by 2025, and this could swell to 4.5 million by 2030.”
3. Shared & service vehicles
What is it?
An integrated model comprising shared mobility, fleet management, and personalized customer services. Services range from car-sharing facilities to fleet management activities, supported by vehicle connectivity. Companies like Uber and Kia are capitalizing on the trend, announcing an agreement to produce electric vehicles together, indicating a broader spectrum of opportunities for manufacturers.
Why are companies heading this way?
To satisfy consumers’ changing preferences for convenience and sustainability, which traditional, ownership-based models can’t offer. Economically, shared services open recurring revenue streams, far different from one-time sale profits traditional manufacturing models offer.
How does this affect the industry?
Conglomerates like Hyundai and Kia are restructuring to focus more on software development, others will follow.9 Manufacturers are pivoting from pure ‘product suppliers’ to ‘service providers.’ Companies like GM are redefining their relations with customers, ensuring increased fleet sales over five consecutive quarters, themselves highlighting profitability and customer retention potential in these services10
What can you do to prepare?
- Develop or invest in fleet management solutions. Operational efficiency and cost optimization achieved through improved fleet management offer a competitive advantage. Stay informed on emerging trends in fleet management.
- Use vehicle connectivity data. Data can help improve product offerings and pre-empt maintenance needs by using this wealth of information. Focus on becoming more prepared for more software-defined vehicles.
- Keep an eye on joint venture opportunities. Companies like Stellantis are forming joint ventures with Foxconn to design critical elements like semiconductors for the industry.11 Similarly, Hyundai and Kia are restructuring their corporate architecture to bolster software development, a path worth considering for others.
“Hyundai and Kia are restructuring their corporate architecture to bolster software development, a path worth considering for others.”
4. Electrification of power supplies
What is it?
The heightened push to produce electric vehicles (EVs). Companies like Ford have heavily invested, announcing plans to invest $29 billion in electric and autonomous vehicles through 2025. This move isn’t just for optical gains: it’s a strategic course towards sustainability, better road safety, efficiency, and competitive advantage among several attractive benefits.
Why are companies heading this way?
Improving technology, changing regulatory scenarios, and shifts in consumer demands due to a worldwide focus on sustainability. According to International Energy Agency (IEA), if the stable growth trend of EVs persists, CO2 emissions from cars could align with the Net Zero Emissions by 2050 Scenario.12
How does this affect the industry?
Companies are in an arms race for better battery technology for more advanced EV lines. Consumers are concerned with charging time vs. battery range, and a Yale study shows that there is a direct correlation between technological improvements and EV adoption.13
What can you do to prepare?
- Invest in research and development and discipline-expanding collaborations to stay competitive. Commit resources for understanding market trends and bring advancements inhouse or form strategic alliances with technology providers.
- Embrace changing manufacturing processes. Focus on lean manufacturing could account for sustainability considerations without compromising on productivity or quality.
- Explore new business opportunities. Electrification unveils a myriad of business avenues beyond vehicle manufacturing. For example, the surge in EV production will bolster the demand for charging stations, requiring extensive charging infrastructure. Instead of viewing this as a challenge, stakeholders can see it as an opportunity to extend their business portfolio.
“Consumers are concerned with charging time vs. battery range, and a Yale study shows that there is a direct correlation between technological improvements and EV adoption.”
Sources
Valona has compiled this analysis by utilizing Valona Platform and global content sources, including government, media, and research institutions.
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1 IBM: Connected Cars and the Role of Telecom
2 McKinsey: Corporate business building to unlock value in automotive…
3 TeslaRati: BYD announces $14B investment in smart car technology
4 ZDNet: Connected cars, powered by AI, will make up 95%…
5 AutomotiveTechnology: Manufacturing Innovations in the Automotive Industry
6 Builtin: 28 Self-Driving Car Companies You Should Know
7 VWGroup: Automated Driving: Volkswagen Group intensified collaboration
8 TheCarGuide: Uber, Kia Sign Electric Vehicle Partnership
9 DetroitNews: GM Creates new business unit to house fleet products, services
10 AutomotiveDive: Stellantis forms semiconductor joint venture with Foxconn
11 IEA: Electric Vehicles
12 Yale: Advances in Technology are Driving Popularity of EVs
