2025 Is a Big Year

The auto industry has been in a state of flux considering electric, self-driving, and software-defined vehicles against a backdrop of geopolitical tension and changing consumer appetites. For automakers undertaking decisions for cars that will launch years from now, reading that crystal ball has always been incredibly difficult. Doing so is even trickier in 2025.

2024 had no shortage of drama. Henrik Fisker’s second automotive startup filed for bankruptcy. Stellantis imploded, culminating in the resignation of CEO Carlos Tavares and an executive shuffle to win back the trust of dealers, suppliers, employees, and customers. The UAW organized the Volkswagen plant in Tennessee but failed at the Mercedes plant in Alabama. A cyberattack virtually shuttered dealerships across the U.S. for weeks. GM folded Cruise, its self-driving division.

Automakers’ fortunes changed the landscape. Elon Musk’s Tesla saw its first sales decline but became a trillion-dollar company. The Korean brands set records, but Chinese companies such as BYD have emerged as the new threat to established players. General Motors figured out how to get more EVs out the door while Ford pivoted from plans for big electric SUVs to affordable EVs and extended-range hybrids. Toyota rode its bet on hybrids to great success, retaining its status as the world’s No. 1 automaker by volume.

The industry is certainly returning to health. Sales of new cars in the U.S. hit 16 million in 2024, the most since 2019, and incentives have returned. GM, Toyota, Ford, Honda, and Hyundai were among those that gained market share at the expense of Stellantis, Tesla, Mercedes, Volvo, and Polestar, which all lost ground. American luxury is coming back with Cadillac and Lincoln sales on the rise, yet Jeep and Ram are struggling mightily to regain their glory days.

Still, this year is lining up to be even more dramatic and chaotic. The second election of Donald Trump throws plans and strategies into disarray. Companies brace for new rules, tariffs, and ripped-up trade agreements. Tax credits could go away, emissions regulations and fuel economy requirements could be kneecapped, labor could be deported, and any supply chain that crosses borders may be disrupted.

Indeed, consumers scooped up new electric vehicles, fearing the end of federal tax incentives. Even without a repeal, the list of eligible vehicles and the rebate amount changes this year, further confusing buyers.

Trump’s environmental bent—or lack thereof—is clear. On Day 1 he withdrew the U.S. from the Paris Agreement, an international climate pact, and true to his “drill, baby, drill” promise, he declared a national energy emergency to make it easier to drill for oil and gas despite domestic production of crude oil already being at an all-time high. And some observers fear pulled incentives for installing charging stations will slow the expanding infrastructure needed to support widespread EV adoption and use.

This all means car companies must find new ways to entice customers to make the switch to battery propulsion, if those customers are even willing to do so. The most obvious: affordable EVs. But that is also the most difficult road because batteries are expensive, making it tough to offer low-cost EVs and still make a profit. Scale helps, which could lead to further industry collaboration on the heels of two large tie-ups in 2024.

Volkswagen turned to Rivian for its EV platform and software expertise, which will go into future VW models. In addition to Volkswagen money, Rivian now has a $6.8 billion federal loan to restart plans for a second plant in Georgia. It spells a brighter future for Rivian, which struggled in 2024.

Nissan, a hurting cowboy with no hybrids in the stable, ended the year with plans to hook up with Honda. Combined with Mitsubishi, the trio would have become the world’s third-largest carmaker if the proposed merger had taken effect in 2026 as envisioned. Honda would have gained crucial scale; its Acura division needs help. Nissan’s Infiniti needs even more. The merger was called off in 2025; other potential partners for Nissan continue to make news.

The collaboration could have helped ward off inevitable competition from Chinese automakers. Tariffs are not a permanent solution for a global industry—it’s likely naive to think the Western world can keep Chinese vehicles out forever any more than it stopped Japan and Korea from selling vehicles worldwide. BYD is the tip of the spear, second only to Tesla in global EV sales, with a startling ability to quickly develop, manufacture, and sell quality EVs.

Look for EV sales to continue climbing in 2025, just not at the pace many originally—and optimistically—anticipated. Despite some product delays, new models will continue to populate our roads, and hybrids will almost certainly only grow in popularity.

In the end, the real power broker is the consumer, whose tastes will continue to guide the market. The onus is on people in the car industry to entice them. To learn about many of the automotive movers and shakers working on this challenge, check out our annual Power List and the 2025 MotorTrend Person of the Year. It’s up to these players to make sense of all the drama and change coming their way and ours.