Automotive Industry

A comprehensive manufacturing industry of the world's largest scale spanning the design, production, sales, and servicing of automobiles, currently being reshaped by electrification and software-defin

Automotive Industry

Overview

The automotive industry is a representative comprehensive manufacturing sector that covers the entire process of automobiles, including passenger cars and commercial vehicles, from design, development, production, sales, and financing to maintenance and scrapping. Worldwide, roughly 80 to 90 million new vehicles are sold annually, making it one of the largest industries by revenue among single sectors. It forms a dense value chain not only of finished-vehicle manufacturers but also of parts, materials, semiconductor, battery, and software companies, and is regarded as a core industry that determines a nation's manufacturing competitiveness and employment.

Main Content

Industry Structure and Value Chain

The automotive industry largely consists of Tier-1 suppliers (engines, transmissions, batteries, etc.), Tier-2 and Tier-3 suppliers, finished-vehicle makers, and sales dealers along with financing, insurance, and maintenance services. For a long time, a division of labor has been maintained in which finished-vehicle makers handle final assembly, brand management, and design, while thousands of partner companies supply parts. In recent years, as the share of so-called new components such as batteries, automotive semiconductors, and operating systems (OS) has grown, the center of gravity of the value chain is shifting toward software and electronic components.

Major Companies and Brands

The global market has long been led by Toyota, the Volkswagen Group, Hyundai Motor and Kia, Stellantis, General Motors (GM), Ford, the Renault-Nissan-Mitsubishi Alliance, Honda, BMW, and Mercedes-Benz, among others. Recently, Tesla and China's BYD, SAIC, Geely, and Changan have grown rapidly, changing the landscape. In particular, BYD rose to the top ranks globally in electric vehicle and plug-in hybrid sales after 2023, and in 2024–2025 it at times outperformed Tesla on a quarterly revenue basis.

Parts and Materials Industry

The battery market is divided among LG Energy Solution, Samsung SDI, SK On, CATL, BYD, and Panasonic, among others, and alongside competition over form factors such as cylindrical, prismatic, and pouch types, a rivalry between LFP (lithium iron phosphate) and NCM (nickel cobalt manganese) has taken shape. Automotive semiconductors are supplied by Nvidia, Qualcomm, NXP, Infineon, and Renesas, among others, and their importance has grown sharply with the transition to software-defined vehicles (SDVs).

Sales, Financing, and Services

Automobile sales feature a coexistence of the traditional dealer-network-based approach and Tesla-style direct sales and online ordering. Auto financing such as installment plans and leases is led by captive finance arms affiliated with finished-vehicle makers, and recently new revenue models such as subscription services, software option payments, and OTA (over-the-air) update-based feature sales are being attempted.

History and Stages of Development

After internal combustion engine automobiles appeared in the late 19th century, Ford's conveyor-belt mass production method in the 1910s set the industry standard. In the 1970s, the oil shocks brought Japanese cars to prominence, and from the 1990s onward, global platform strategies and modularization spread. In the 2010s, electric vehicles, autonomous driving, and connected cars emerged as key keywords, and entering the 2020s, the electrification transition became the central axis of industrial restructuring.

Latest Trends (2024–2025)

The EV Chasm and the Revival of Hybrids

Electric vehicle demand, which had grown rapidly through 2023, slowed markedly from 2024, entering the so-called EV chasm phase. With reduced subsidies, insufficient charging infrastructure, high vehicle prices, and interest rate burdens overlapping, consumers shifted to hybrids (HEVs) and plug-in hybrids (PHEVs). Hyundai Motor and Kia, Toyota, and Honda greatly expanded their hybrid lineups, and hybrid sales in the U.S. market recorded double-digit growth rates.

The Rise of Chinese Companies and Tariff Conflicts

Chinese EV makers led by BYD rapidly eroded markets in Europe, Southeast Asia, and Latin America, leveraging their domestic price competitiveness and vertical integration. In response, the United States imposed a 100% tariff on Chinese-made EVs in 2024, and the EU also applied countervailing duties of up to around 35% on Chinese EVs at the end of 2024. In 2025, as the United States imposed a 25% tariff on imported automobiles and parts, pressure intensified for global supply chain restructuring and expanded local production.

Software-Defined Vehicles (SDV) and Autonomous Driving

As the value of vehicles shifts from hardware to software, SDVs are becoming the industry standard. OTA updates, centralized E/E architectures, automotive OS, and high-performance computing chips have become core competitive advantages, and collaboration between finished-vehicle makers and IT companies has become commonplace. In autonomous driving, Waymo expanded commercial robotaxi services in major U.S. cities, and Tesla signaled its robotaxi business. In China, Baidu Apollo Go and Pony.ai, among others, expanded the areas where driverless robotaxis operate.

Battery Technology and Supply Chains

The share of LFP batteries grew sharply, and competition over the commercialization of all-solid-state batteries began in earnest. Toyota, Nissan, Samsung SDI, and CATL, among others, presented mass-production targets for 2027–2030. The U.S. IRA (Inflation Reduction Act) and AMPC (Advanced Manufacturing Production Credit) promoted local U.S. investment by Korean and Japanese battery companies, but entering 2025, policy uncertainty grew and a pattern of adjusting investment pace emerged.

Reorganization of Production Bases

The Hyundai Motor Group completed HMGMA (Metaplant America) in Georgia, USA, establishing a production system for more than 300,000 EVs and hybrids per year, and Toyota, Honda, and BMW also increased local investment in the United States. In Japan, management integration negotiations between Honda and Nissan collapsed in early 2025, and discussions on industry restructuring continued.