The automotive industry is one of the largest markets in the world. Humans have always needed a way to get from point A to point B, and in the modern world, the industry has grown to include several vehicle brands, vendors, dealerships, logistics, data, and more.
Within the past year, we've witnessed significant policy shifts affecting global trade, continued integration of AI technologies, and increasing pressure for enhanced data management as everything becomes even more digital.
Now, as we move through 2025, it's the perfect time to assess some of the key challenges and trends facing the automotive industry so you can stay ahead of the curve.
Key challenges for the automotive industry in 2025
Will the daily grind for dealerships stay the same? Will customers find new ways to shop for vehicles online? How will automotive brands overcome the challenges coming their way this year? Let's dive into all of it.
First, it's important to remember that there comes an opportunity with every challenge. For those in the automotive industry, truer words have never been spoken.
Navigating the new tariff landscape
According to RSM's 2025 automotive trends report, the industry is facing significant disruption from recent policy changes. The newly imposed 25% tariffs on imports from Mexico and Canada, though temporarily delayed, threaten to drastically impact global automotive supply chains. With approximately 90% of Mexican and Canadian auto exports going to the U.S., and major manufacturers like Volkswagen, BMW, and Ford operating plants in Mexico, these tariffs could reshape entire production strategies.
Mark Ludwig, National Leader of Trade and Tariff Advisory Services at RSM, notes that "The new U.S. administration is keen to drive manufacturing in all its forms back to American shores," with additional 10% tariffs on Chinese products and potential 25% tariffs on imported autos and semiconductors creating a complex trade environment for automotive companies to navigate.
Managing "dirty data" in dealership operations
One emerging challenge highlighted by recent industry analysis is the prevalence of "dirty data" within dealership operations. This includes duplicate entries, bogus customer information, and inconsistent data formats that compromise everything from customer relationship management to accurate revenue projections.
As Jason Tryfon, President of Authenticom explains, clean, usable data has become recognized as "the backbone of dealership operations and vendor relationships," directly impacting customer retention, employee satisfaction, and ultimately, profitability. Dealerships that fail to address these data quality issues risk losing competitive advantage in an increasingly data-driven marketplace.
Cybersecurity threats in an increasingly connected landscape
With the continued growth of connected vehicle technologies, cybersecurity has emerged as a critical concern.
According to the RSM report, by Q2 2024, organizations were facing an average of 1,636 cyber attacks per week—a 30% year-on-year increase. Manufacturing represented 29% of global ransomware targets, with ransomware-related costs in the automotive industry skyrocketing from $74.7 million to $209.6 million in just the first half of 2023.
The implementation of the EU's Digital Operational Resilience Act (DORA) in January 2025 signals increasing regulatory attention to this challenge, requiring stronger protections for software and sensitive data throughout the automotive value chain (RSM Global, 2025).
Ongoing chip sophistication requirements
While the severe chip shortages of the early 2020s have somewhat abated, the industry now faces a new challenge: the need for more sophisticated semiconductor technology.
As Jim Ward, Partner at RSM United States, points out, "It remains important during 2025 for the industry to remain aware of the delicate balance of semiconductor supply chains and monitor the potential impacts other industries, such as telecommunications, can still have on an industry that utilizes more mature chips which are less profitable to the semiconductor supply base".
With only 26% of organizations reporting sufficient chip supply, and automotive manufacturers competing with other industries for advanced semiconductor technology, managing this resource constraint remains a significant challenge for 2025.
Key trends for the automotive industry in 2025
What will the rest of 2025 bring to the automotive space? How will the latest trends be embraced? While some trends might be the ongoing popularity of SUVs now competing with a growing but uneven EV market, most trends in the automotive industry are new developments that have been brewing for a while and are now moving into center stage.
The EV market is evolving, not revolutionizing
Despite earlier predictions of an EV revolution, adoption rates have been more gradual than anticipated. According to the RSM report, the global EV market continues to grow—with electric and hybrid vehicles on the road increasing from 26 million in 2022 to 40 million in 2023—but not at the pace once projected. With the new administration rolling back EV incentives and halting federal funding for charging infrastructure projects, the U.S. market in particular may see shifts back toward traditional internal combustion engine vehicles.
However, in other markets like the EU, regulations are scaling up in preparation for the 2035 ban on new ICE vehicles, creating a fragmented global landscape for automotive manufacturers to navigate.
The rise of CASE technologies continues
Connected, autonomous, shared, and electric (CASE) vehicle technologies remain a strong focus across automotive markets. The global connected car market, valued at $80.87 billion in 2023, is projected to reach $386.82 billion by 2032, reflecting a robust 19.2% compound annual growth rate.
Similarly, the autonomous vehicle market is expected to grow from $1,921.1 billion in 2023 to $13,632.4 billion by 2030. Major drivers include increasing commercial applications like logistics and ride-sharing services, along with advances in AI, sensor technology, and connectivity improving safety and adoption.
Data control becomes a competitive advantage
As data becomes increasingly central to automotive operations, the ability to control and leverage that data has emerged as a critical competitive advantage. Tools like DealerVault give dealerships unprecedented control over their data flows, allowing them to understand where their data is going and to whom, and most importantly, where it should be going.
This trend toward data sovereignty—controlling not just what data you collect but who you share it with and for what purpose—represents a significant shift in how automotive businesses approach their information resources.
Decentralized manufacturing hubs gain traction
With trade tensions rising and sustainability regulations varying widely across regions, a new trend is emerging: decentralized manufacturing hubs producing vehicles for local markets. This approach helps manufacturers navigate the complex regulatory landscape while reducing shipping costs and carbon footprints.
Chinese EV automakers in particular are expanding into new markets including Europe, other Asian countries, and Latin America, potentially creating a completely new global EV landscape with regional production centers serving local demand.
AI integration deepens across the value chain
The rise of agentic AI represents perhaps the most transformative development for automotive retail in 2025. Unlike earlier AI implementations that focused on manufacturing optimization or simple voice assistants, AI agents are now revolutionizing how consumers research, shop for, and purchase vehicles.
According to recent research by Salesforce, AI agents are increasingly viewed as a solution to long-standing frustrations in the automotive customer journey. A February 2025 survey of over 1,000 American car owners and lessees revealed that 61% want AI agents to find and recommend the best car for their needs.
This demand comes at a critical time, as the survey also found that one in three American car owners have delayed or canceled getting a new car due to various pain points in the traditional buying process. These frustrations include:
- Budget concerns (62%),
- difficulty choosing the right vehicle (32%),
- concerns about dealership transparency (31%); and,
- intimidating negotiation processes (26%).
The impact of AI agents extends beyond the purchase process to the entire ownership experience. The Salesforce survey found that 70% of car owners would use an AI agent if it could diagnose and address car issues in real time, while 63% want agents to help optimize their navigation based on personal preferences. Younger generations are particularly enthusiastic, with over half of Gen Z (55%) and millennial (53%) car owners believing AI agents will make owning or leasing a car easier.
As consumers increasingly look to technology to simplify their automotive experiences, dealers and manufacturers that embrace agentic AI may find themselves with a significant competitive advantage in the evolving marketplace of 2025.
Ultimately, even with some significant challenges, 2025 will be a transformative year for the automotive industry. Dealerships, manufacturers, and vendors can look forward to new technology, better data management capabilities, and evolving market structures. Customers can look forward to increasingly personalized experiences, though affordability may vary significantly by market and vehicle type.
.jpg)
