The Global Car Industry in Transition
A new report from the International Energy Agency (IEA) examines how profound changes in global car production and sales—driven by the rapid rise of electric vehicles (EVs)—are reshaping the automotive industry and redefining competitiveness worldwide.
As electric car sales continue to climb and the geography of the auto sector evolves, the report, What Next for the Global Car Industry, explores the implications for established automakers and their home countries. Drawing on original analysis of market and cost data, alongside consultations with industry stakeholders, the study offers a comprehensive look at opportunities and risks in a fast-changing landscape.
Global car sales rebounded to nearly 80 million units in 2024 after the pandemic slump. However, all recent growth came from electric and hybrid vehicles, which accounted for about 30% of total sales. New market entrants are steadily gaining ground in the EV segment, while sales of pure internal combustion engine (ICE) cars have declined by 30% since peaking in 2017.
At the same time, the centre of gravity in global car markets is shifting. China and other emerging economies now represent more than half of worldwide car sales, compared with just 20% in 2000. China has more than doubled its car production since 2010 and now holds 40% of global manufacturing capacity, far ahead of Europe and North America, which each account for around 15%. In 2024, China surpassed the European Union as the world’s largest car exporter, and roughly 70% of electric cars sold globally are produced there.
“The global car industry is a cornerstone of many national economies, directly employing more than 10 million people worldwide and supporting millions more,” said IEA Executive Director Fatih Birol. “It is also the single largest source of global oil demand. Today, the industry is undergoing major transformations with far-reaching implications for economies and the energy sector alike. Three structural shifts are underway: where cars are produced, which regions are driving sales growth, and which technologies consumers are choosing. This report provides a strong foundation for informed decision-making by governments and industry, recognising that there is no one-size-fits-all solution.”
These trends present both challenges and opportunities for incumbent automakers and the countries where they operate. The report outlines strategic steps that could help strengthen competitiveness over the medium and long term. While sales of ICE vehicles are declining in China and advanced economies overall, they are still expected to grow in some regions, forcing carmakers to manage multiple market trajectories simultaneously. As a result, some manufacturers may opt for strategies that span a broader mix of technologies.
The analysis also highlights significant cost differences in car production. Manufacturing vehicles—especially electric ones—is currently cheaper in China than in advanced economies, largely due to large-scale production and high levels of vertical integration. Energy prices and labour costs play a role, but to a lesser extent. Lower costs for powertrain components account for nearly 40% of the EV manufacturing cost gap, much of which is tied to batteries. On average, battery cell prices in China are more than 30% lower than in Europe and over 20% lower than in the United States.
Importantly, the report notes that this cost gap is not insurmountable. With sufficient time and investment, advanced economies can close the difference. While access to low-cost components and critical minerals explains about 30% of the gap, around half is due to manufacturing efficiency and automation. As production scales up and experience grows, comparable levels of battery manufacturing efficiency can be achieved outside China.
