Anticipated Trends in the Automotive Sector by 2025:
In the year 2000, Visteon was created as a new entity from Ford's electrical division, and one of its future-focused initiatives was to envision the significant changes that would impact the automotive industry by 2025. These newcomers to the supply chain anticipated numerous technological advancements, such as remote started cars and self-driving vehicles, which have either become commonplace (like remote starts) or are on the brink of reality (such as flying cars). Predicting such a future is instrumental in guiding strategic planning and investments.
With the passing of 9/11, the Great Recession, COVID-19, and conflicts in various regions, 2025 is just around the corner. Yet, the importance of anticipating the future remains essential, leading us to the following five (5) predictions for the automotive industry in 2025.
#1: Software Recall Spending to Double Again
The trend in software recalls has been steadily increasing, with a 42% jump in vehicles affected by software-related issues in the past year, compared to 13% in 2023. In 2024 alone, I had to visit the dealership seven (7) times for software-related issues. Despite the potential for Over-The-Air (OTA) updates to address an estimated 13% of software-related recalls, as revealed in a Detroit Free Press interview with Todd Warren, a professor at Northwestern University and Advisory Board Member for Envorso, the high cost of architectural issues linked to Electric Vehicles (EVs) has caused many automakers to put on hold OTA updates as they were associated with delayed EV launches due to softening demand.
Automakers and suppliers have tried to address these quality problems, but the escalating content and cost pressures have caused recall and non-safety repairs to surge in an impactful manner. This neglect of quality will lead to the next prediction.
#2: GM or Ford: Merger or Alliance in the Near Future
The DIY mentality, which assumes either possessing the knowledge or hiring externally to achieve a goal and that it's cost-effective, is not suitable for General Motors (GM) or Ford. Both companies have attempted to tackle the challenge of Software-Defined Vehicles and the necessity of OTA and cloud-based services, but have struggled and delayed vehicle releases.
The cost of doing it alone is enormous – requiring a complete overhaul of the electrical system – and automakers can no longer delay the deployment of this technology.
“Collaboration is the only way forward,” says Dr. Ludmilla Derr, the Managing Director of Elite Expert Conferences and facilitator of several development alliances. “In this market, companies need to be cautious about investments and half-funded collaborations are even more advantageous. Furthermore, these partnerships often result in unexpected synergies.”
The prospect of mergers, acquisitions, or partnerships between these iconic brands may seem bold, but the industry has already seen Volkswagen invest $5.8B USD in a joint venture with Rivian for its software-defined architecture and Honda and Nissan discuss an alliance to share software and electrification components to reduce development expenses. Both GM and Ford must reconsider their DIY approach and find a willing collaborator.
#3: Voice Assistants to Gain More Popularity
High-resolution screens have increased in usage and spread in the past few years (see "A Bug To The Light: The Attraction to Touchscreens in Cars") and market predictions expect further proliferation. Coupled with the delays in autonomous driving, two demands emerge for automakers: 1) the need to distinguish themselves through technology and 2) the need to combat driver distraction.
The solution: personalized voice assistants (i.e., not Siri or Alexa).
“Users are overwhelmed,” suggests Nils Schanz, Executive Vice President of Product and Technology at Cerence AI. “Cognitive overload and driver distraction are too high, and this is what automakers are recognizing. They want to restore balance, enabling end-users to comfortably use the systems, leading to the increasing prominence of voice assistants.”
Not only will this gain popularity through customization, but Artificial Intelligence will enable a seamless integration into interactions, rather than the historical push-button followed by structured voice commands.
#4: South American Tech Centers to Expand
Automotive has traditionally faced slim profit margins and, in an effort to reduce expenses while increasing content, has pursued areas with lower-cost labor forces. Some of this encouragement was the driving force behind the North American Free Trade Agreement (NAFTA, 1992) – causing manufacturing and development to move to Mexico – an expected increase in exports to $1B USD in 2025 from $128M USD in 1990, and an increase of 15 times in China since 2000.
However, recent political strife and the pandemic have caused automakers to reassess their global development strategy. The U.S. Congress considered a bill that could limit U.S. investments in artificial intelligence and other technologies sectors in China, threatening safety and security. Additionally, labor costs in these countries have risen significantly (e.g., India rose 55% from 2010 to 2021).
In the near future, North American firms are planning to shift to economically favorable regions in South America due to fewer political constraints and minimal time zone complications. To illustrate, Argentina boasts 1,200 active startups, marking a considerable 25% increase since 2020. Furthermore, Alcor projects an expansion to an impressive 7.1M tech jobs by 2034, equating to a steady 8.3% Compound Annual Growth Rate (CAGR) over the subsequent decade.
#5: In-Person Events to Bounce Back
Research indicates that an astounding 82% of conference attendees express a strong preference for face-to-face interactions, and 75% of exhibitors intend to maintain or enhance their marketing expenditures. Moreover, a significant majority of CEOs, approximately 83%, expect an all-encompassing return to the office on a full-time basis within the next 3 years. This figure has substantially grown from the 64% recorded in 2023.
It's worth noting that not all personnel will revert to a traditional 5-day workweek, with 86% of employees expressing a desire for at least 2 days of remote work per week. Regardless, the number of on-site employees is expected to ascend significantly in 2025.
In light of the predicted return to the office, automotive companies may look to host in-person events to facilitate face-to-face conversations with potential clients and partners, leveraging the preference for such interactions among attendees and exhibitors.
The advancements in transportation technology, including the rising popularity of software-defined vehicles and the proliferation of voice assistants, have led to increasing content and cost pressures, prompting collaboration and innovation in the industry. Automakers might consider collaborating with technology companies or forging strategic partnerships, as demonstrated by Volkswagen's investment in Rivian and Honda and Nissan's potential alliance, to share resources and reduce development expenses in the development of cutting-edge transportation solutions.
