Gartner, the tech research and consulting firm, has outlined how certain technologies and geopolitical shifts will shape the automotive sector in the coming year, amid pressure on emissions and intense growth in non-Western markets.

“Software and electrification will remain the two main drivers of the automotive sector’s transformation,” explained Pedro Pacheco, VP analyst at Gartner.

“However, in 2025, automakers will face uncertainties regarding emission regulations and growing trade tensions between China and the West, particularly in the electric vehicle (EV) market.”

The evolving political landscape in the U.S. and EU is reopening the discussion on vehicle emission regulations, producing uncertainty for the automotive industry. As a result, some original equipment manufacturers (OEMs) may be reluctant to put EVs at the centre of their strategy, the consulting firm noted.

That said, it estimates that shipments of EVs (including cars, buses, vans, and heavy trucks) will grow 17% in 2025. By 2030, Gartner predicts more than 50% of all vehicle models marketed by automakers will be EVs.

CASE Adoption Slowed by Geopolitics
Trade barriers set by the U.S. and EU on Chinese EVs will slow the adoption of connectivity, autonomy, software, and electrification (CASE) in these regions, Gartner highlighted. This is because, on average, Chinese EVs are the most advanced type of vehicles in these areas.

Specifically, automakers from China have a competitive edge in software and electrification, supported by vertical integration and efficient development, enabling them to offer more advanced, affordable EVs. Increasing trade barriers may diminish this advantage, however, limiting the variety of competitive EV products for consumers.

“Drone manufacturers and Chinese telecommunication companies are already feeling the impact of international sanctions, and robots are likely to follow,” said Bill Ray, who serves as distinguished VP at Gartner.

“The ubiquity of intelligent, updatable software, remotely accessible cameras and the integration of data gathering into the automotive business model make it inevitable that geopolitics will fragment the market and, therefore, slow adoption.”

OEMs Expand Software Partnerships
Legacy OEMs have struggled to advance their in-house software capabilities, the research firm outlined.

As a result, many have made agreements with Chinese OEMs to acquire their vehicle electrical/electronic (E/E) architecture, thereby increasing their reliance on the software and hardware capabilities of EV makers from China.

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OEM Plant Closures Prompted by Overcapacity
Gartner noted that, for years, production overcapacity has been a challenge for several European and North American car factories alike. The recent increase in import tariffs on Chinese EVs imposed by the U.S. and the EU is likely to exacerbate this issue, too.

In response, Chinese automakers may set up factories in Europe and the US, the research firm said, or in free-trade partners like Morocco or Turkey, as to maintain competitive pricing.

Gartner expects this situation to most likely lead to several automotive factories with low utilisation to close or be sold to other automakers. In turn, this will create a domino effect, leading to the closure of supplier factories.

This will then redefine the car manufacturing map of the U.S. and Europe, the consulting firm explained, making low-cost countries the major hubs in automotive production capacity and supply chain.