With disruptions increasingly frequent, a new operating model focused on agility and cost is needed to survive and prosper in the increasingly competitive auto market, says AlixPartners outlook

• Tariff costs should drop by 40% from current negotiating anchor levels to $30 billion in 2026, with most being passed to customers, impacting US sales
• Chinese automakers to double their European market share to 10% by 2030
• AI-enabled solutions are cutting development times and verification costs by 20%

 

DETROIT and LONDON (June 19, 2025) – Automotive companies must pursue wholesale transformation of their operations if they hope to survive the existential level of disruptions hitting the industry today, from tariffs and other geopolitical actions to less-than-expected electric-vehicles sales to the continued rise of many hyper-competitive Chinese auto companies, regionalization pressures, supply constraints, ADAS opportunities and software-defined vehicle architectures. That’s according to the 2025 AlixPartners Global Automotive Outlook, the global consulting firm’s annual in-depth industry analysis.

The Outlook delivers a stark review of a hundred-plus-year-old industry that is being whipsawed by slow growth, stubbornly high costs, stranded EV costs in the West and the rise of technology and cost-leadership competition from leading Chinese NEV, or new-energy vehicles players. Suppliers and OEMs should continue to look to the lessons learned from the winners in the China market for clues on how to transform at home.

Key highlights of the Outlook include:

• Global light-vehicle sales will increase only 1% in 2025, with expansion in China and elsewhere in Asia offsetting declines in the U.S. and Europe
• Sales in China will grow just 3% in 2025, likely spurring more international expansion plans by the stronger Chinese automakers and suppliers
• Chinese automakers are set to double their European market share to 10% by 2030 as they localize while European automakers face lower capacity utilization
• The cost of new U.S. tariffs will likely land at around $30 billion for 2026. 
• Electric vehicles of all kinds, including BEV (battery-electric vehicles) and REEV (range-extended electric vehicles) are now predicted by AlixPartners to account for a 30% share of the global market by 2030, and the firm’s forecast for the US market for 2023 is down 46% from its forecast last year, to a 23% share, due mostly to the changed regulatory environment
• Chinese automakers are expected to boost annual production in Europe by 800,000 vehicles by 2030, while their European counterparts could shutter 400,000 in capacity, the equivalent of 1.5 production plants. That’s triggered portfolio pruning, with European suppliers earmarking more than $18 billion in assets for disposal, according to the analysis.

On a positive note, the Outlook identifies several actions auto companies can take to meet the huge challenges that lie ahead. 

A key requirement is fully understanding and capitalizing on the advanced-mobility revolution, including ADAS (advanced-driver-assistance-systems). The Outlook notes that growth in the global ADAS market is outpacing that of traditional vehicles, and forecasts that it will reach $50 billion by 2030.

Another is harnessing the power of AI-enabled solutions to improve operations at automakers and suppliers, which can cut development times and verification costs by 20%.

Careful selection and adoption of AI-enabled tools is key to enabling the agility required to navigate shifting market conditions, says the Outlook. It notes that AlixPartners’ client engagements have identified paths to trim up to eight months from a typical five-year product-development cycle with AI-driven design and testing, and trim 20% from verification and validation (V&V) costs. This closed about a third of the gap to benchmark Chinese NEV automakers’ product development timing.

The goal, says the AlixPartners analysis, is to speed development at lower cost, with “good-enough” designs to meet consumer preferences, and trusting digital tools. Decoupling hardware and software development cycles, with early supplier engagement and dual-sourcing can enable that speed. 

“The auto industry, including in the West and including suppliers, has to adopt modern tools and competitive operating models to create the agility to handle the increasing frequency of disruptions,” said Mark Wakefield, Global Automotive Market Lead at AlixPartners. “Winners will overcome the paralysis of increasing disruption, and prepare themselves for distributed, decisive actions backed with common, united data and with a strategic stance and objectives, rather than the old hierarchal silos, stacking of specifications, and deterministic strategies.”

China’s export drive cements its role as the driving force for change across the industry, which is wrestling with supply-chain challenges exacerbated in recent months by access to critical minerals. This is leading to a bifurcation of the industry into the China pole and the U.S. pole.

“There’s been a non-stop parade of disruption in the auto industry and it’s picking up steam,” said Andrew Bergbaum, Global Leader of the Automotive & Industrial Practice at AlixPartners. “One result is that, as I sometimes put it, ‘Europe is for sale’—meaning all those M&A deals and opportunities these days involving European auto companies. Clearly, all auto companies today, globally, should be thinking about taking actions that perhaps they’ve never thought about before.”

 

Contact:
Tim Yost
+1 248 227 1694
[email protected]

About AlixPartners
AlixPartners is a results-driven global consulting firm that specializes in helping businesses successfully address their most complex and critical challenges. Our clients include companies, corporate boards, law firms, investment banks, private equity firms, and others. Founded in 1981, AlixPartners is headquartered in New York and has offices in more than 20 cities around the world. For more information, visit www.alixpartners.com.