Automotive tendencies in 2025 impacting middle-market organisations

Sustainability, regulations, and supply chain challenges in automotive manufacturing

OEMs are juggling more regulations with fluctuating demands and ongoing chip shortages

Global manufacturing in 2025 is seeing continued turbulence as it tries to strike a balance between adopting disruptive technologies, managing material shortages, and staying compliant with evolving sustainability needs and regulations.

The state of sustainability

The global automotive industry, responsible for 10% of the world’s carbon dioxide emissions, faces ongoing pressure to overhaul its practices. However, the landscape is proving difficult to steady with an intricate maze of regulations that differ by country or region and lack a unified benchmarking process for sustainability.

“In Europe, sustainability plays a central role in automotive production, as the EU is pursuing strict emissions regulations and climate targets,” says Mühlenbruch. “Car manufacturers increasingly need to transition their production to e-mobility and integrate more sustainable manufacturing processes, such as the use of recycled materials and green energy.” He continues, “The main challenges in the supply chain are the complex supply of raw materials, especially for batteries, and the need to replace fossil fuels in logistics. Transparency and sustainability in global supply chains are also often difficult to ensure.”

The EU’s Green Deal and its accompanying “Fit for 55” initiative aim to cut carbon emissions drastically by 2030, piling new expectations on manufacturers to reduce their environmental impact. Adding to the challenge, measures such as stricter Euro 7 tailpipe standards and updated rules on battery recycling demand deeper innovation within supply chains and operations.

“With the EU taxonomy and emissions regulations, the EU sets strict standards that oblige manufacturers to comply with environmental and social requirements. Innovation, cooperation between industry and politics and investment in research and sustainable technologies are required to overcome these challenges.”

Markus Mühlenbruch, Partner, Germany

On the other side of the globe, in Asia, China has implemented a landmark energy policy, aptly named the ‘Energy Law’, as of January 2025. The law emphasises a cleaner and more efficient use of fossil fuels, placing a higher emphasis on sustainability and developing renewable energy infrastructures. This comes as China continues to make their presence known in the global EV scene, with ramped-up production and dominance in the international EV market.

“The Asia Pacific region is making significant progress in automotive sustainability,” says Wu. “China’s leading EV production landscape and its new ‘Energy Law’ are driving cleaner energy use and renewable infrastructure development. Other emerging economies like Vietnam, Thailand, and Malaysia are also showing strong growth in the EV market, supported by government incentives and infrastructure improvements. These efforts are accelerating the transition to electric mobility and contributing to global sustainability goals.”

In Latin America, the pace is a bit more varied. Brazil’s ongoing Rota 2030 programme incentivises energy-efficient technologies and biofuel use, while Mexico enforces strict emissions limits on diesel engines, pushing manufacturers to adopt cleaner solutions. At the same time, a limited EV infrastructure and uneven policy application dampen the pace of meaningful progress throughout the region. Going further north, the U.S. is seeing a big focus shift away from sustainability-oriented policy; a move that will shift manufacturing and market dynamics throughout the nation whilst potentially disrupting the Latin American manufacturing scene as we will discuss later in this outlook.

Whilst the U.S. may be bucking it, there is certainly a global trend towards a more sustainability-forward manufacturing scene. However, as with all complex bodies of rulesets, differing rules and regulatory mandates across the globe make it easier for international automakers to fall foul of compliance. The pressure is certainly on.

Chip shortages remain a major thorn in automotive’s side

The ongoing global semiconductor shortage continues to cast a shadow over manufacturing progress, particularly for industries such as automotive and electronics. While efforts are underway from many different automakers to expand fabrication capacity, lead times for chip production remain long with little sign of a solution in the near future.

The shortage may not be as bad as it was in the early 2020s; however, even with a larger output, a report has found that only 26% of organisations that are reliant on these chips have a sufficient supply. This leaves the vast majority of companies concerned with their supply and wanting for more.

“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 utilises more mature chips which are less profitable to the semiconductor supply base.”

Jim Ward, Partner, United States

The shortages have forced manufacturers to delay product launches and reduce outputs, among other issues. Asia, home to key production hubs, remains at the epicentre of attempts to address this crisis, with nations like Taiwan investing heavily in scaling chip production. Additionally, Europe and the U.S. have sought to bolster their chip and semiconductor production with the ‘European Chips Act’ and the ‘CHIPS and Science Act’, respectively. Whilst these acts have been active for some years now, the landscape has not changed drastically. Until these efforts bear fruit, the industry will need to focus on mitigating risks and prioritising demand effectively.