Automotive manufacturers plan to accelerate investment in hybrid vehicles and reshore production with an eye on North America.
Automotive manufacturers face a number of challenges, from labor issues to concerns around reshoring, but new technologies are driving opportunities that have many automakers optimistic about the future. The U.S. automotive market was valued at $4.8 billion in 2024 and is expected to grow to $13.8 billion by 2033, according to Custom Market Insights.
Reshoring supply chains and striking the right balance between legacy products and those that incorporate newer technologies are among the hurdles automotive manufacturers see on the road ahead in 2025, according to a survey conducted by Thomas in October 2024. Survey respondents also identified bright spots that make them feel confident about growth in the year to come, including advanced manufacturing techniques such as 3D printing and robotics, and new types of electric batteries.
In this report, we’ll examine some of the trends and technologies that will be top-of-mind for the automotive industry in 2025 and highlight findings from Thomas’ automotive survey.
Key Insights from the Survey:
- 63% of automotive industry professionals we surveyed strongly (25%) or somewhat (38%) agree that they are optimistic about the growth of the electric vehicle market in the U.S. in 2025.
- Investment in hybrid vehicles will grow in 2025. More than a third (37%) of automotive manufacturers said they plan to invest in hybrid vehicles — more than the percentage who said they plan to invest in electric (28%) or internal combustion engine (30%) vehicles.
- About six out of 10 respondents said they either strongly (23%) or somewhat (38%) agree that they are optimistic about the growth of the autonomous vehicle industry in the U.S. in 2025, although investment in high levels of driving automation remains relatively low.
- Almost 85% of respondents plan to do more business with North American suppliers — 40% said they are likely to add North American products or raw materials suppliers to their supply chain in the next 12 months, while 31% said they are very likely and 13% said they are extremely likely to do so.
- 41% of automotive manufacturers said they plan to reshore manufacturing operations in 2025.
- Labor is a key concern when it comes to reshoring. Almost half (47%) of respondents named higher labor costs among their greatest reshoring challenges and 40% said the same of skilled labor shortages.
- Automakers are excited about technological advancements. Almost half of respondents (45%) said Industry 4.0 technologies such as 3D printing and robotics are among the innovations they are most optimistic about in 2025. Other innovations inspiring optimism include AI integration (30%), new types of electric batteries (41%), and alternative fuel solutions (37%)
Electrification
Electric vehicles (EVs) have a growing presence on U.S. roads, and more than 60% of automotive industry professionals surveyed by Thomas said they are optimistic about the growth of the EV market in the U.S. in 2025.
Investment in EV Infrastructure Is Growing to Benefit EVs and Hybrids
To support the growing number of plug-in electric vehicles (PEVs) on the road, which include both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), the federal government has made billions of dollars in grant funding available to increase charging infrastructure. Sales of PEVs increased 7.8% year over year, according to a September 2024 report from the Joint Office of Energy and Transportation.
The Bipartisan Infrastructure Law, which President Joe Biden signed into law in 2021, designated $7.5 billion in grant funding for EV chargers. These investments, including a $1.3 billion funding opportunity in May 2024 that was the largest single grant funding opportunity for EV charging in U.S. history, caused the number of publicly available electric vehicle chargers to double during the Biden administration. The majority of funding allocated for EV charging will be tied to existing projects by the start of 2025, making it unlikely that federal funding for EV charging will be pared back when President-elect Donald Trump takes office, experts say.
EVs Could Bolster the U.S. Electrical Grid
EVs also have the potential to strengthen the U.S. electric grid as more Americans drive vehicles that require charging. By 2050, the number of EVs projected to be on the road in the U.S. will require an additional 1% of electricity production per year, according to experts cited by U.S. News & World Report. U.S. electricity production has grown at an annual rate of 3.2% over the past 70 years, suggesting the grid is on track to accommodate EV drivers’ needs — and then some. Stakeholders in the energy industry see opportunities for EVs to benefit the electrical grid by using EV batteries to store excess power. In April 2024, Maryland became the first U.S. state to pass legislation that will require utility companies to support vehicle-to-grid technology. A small group of Ford electric pickup drivers in Baltimore began testing the ability of the trucks to power homes using stored energy during peak summer periods, and other vehicles with bi-directional charging capabilities could similarly send power back to the grid.
Hybrids Appeal to Drivers Looking for a Gradual Transition to EVs
Many consumers are still approaching the transition to EVs with caution. Just 34% of U.S. consumers intending to purchase a new car in the next two years said they plan to purchase an EV, down 14% from 2023, according to the 2024 EY Mobility Consumer Index. The survey found that consumers were less concerned about charging infrastructure and range anxiety than the previous year, but 21% of those surveyed said they would prefer a gradual transition from an internal combustion engine (ICE) vehicle to a fully electric vehicle.
For those hesitant to go all-in on EVs, hybrids offer an appealing transition and often come at a more approachable price point. Hybrid retail sales volumes grew 43.5% year-over-year in 2024, according to CarGurus’ Quarterly Review for Q3 2024. Hybrids made up more than 10% of total retail sales, compared to EVs’ 4.1% of sales. Automakers are taking note of hybrids’ popularity and preparing for continued growth in 2025. Thirty-seven percent of automotive manufacturers surveyed by Thomas said they plan to invest in hybrid vehicles, compared to 30% who said they plan to invest in ICE vehicles and 28% in EVs.
Commercial Vehicles Take the Slow Road
EVs also are making inroads in the commercial vehicle sector, with sales of electric buses and heavy trucks increasing in the U.S., albeit at a slower pace than non-commercial vehicles. Sales of electric trucks in the U.S. increased threefold in 2023 compared to the previous year, although EVs made up less than 0.1% of total truck sales, according to the International Energy Agency’s Global EV Outlook 2024. Major truck manufacturers such as Volvo and Daimler have set aggressive sales targets for EVs, aiming for them to account for as much as 60% of sales, but they have found these goals difficult to achieve, Bloomberg reports.
Automation
In addition to visualizing a future where cars no longer need to be filled up with gas, some automakers are working toward vehicles that don’t need a human driver behind the wheel. About 6 in 10 auto manufacturers surveyed by Thomas said they are optimistic about the growth of the autonomous vehicle (AV) market in the U.S. in 2025.
A Gradual Transition for Autonomous Vehicles
AVs are rolling out on U.S. roadways, but the transition to fully self-driving vehicles isn’t happening as quickly as originally expected. Partial automation and assisted driving are seeing wider adoption as drivers seek out these features for safety and convenience.
Partially autonomous vehicles that require participation from the driver and have features such as lane centering and adaptive cruise control are forecast to rise from about 20% of global vehicle sales in 2024 to about 30% in 2027, according to Goldman Sachs. “By 2030, up to 10% of global new car sales could be Level 3 vehicles: self-driving cars that let drivers take their eyes off the road and their hands off the wheel in select situations, such as on a highway in clear weather,” the financial services company wrote.
Thirty-four states have statutes in place governing how vehicles using autonomous technology can operate, and many state governments are updating these laws as AVs gain traction. In 2024, five states and the District of Columbia passed bills dealing with AVs. As testing of AVs continues and more of the vehicles hit the road, it’s certain that these laws will continue to evolve.
Rideshare Companies Lead the Way with AV Testing
While more drivers are seeking out vehicles with some autonomous features, companies that take the driving out of customers’ hands are aiming to go one step further by eliminating drivers from the equation. Despite many setbacks that have led to recalls and investigations into the safety of so-called robotaxis, companies aiming to offer a driverless taxi experience are pressing ahead with innovation and testing.
Uber users in Austin, Texas and Atlanta will be able to book rides in Waymo robotaxis beginning in early 2025, and the ridesharing platform is also partnering with autonomous vehicle startup Avride to offer autonomous food delivery and rides in Austin, Dallas, and Jersey City, New Jersey. Lyft announced several partnerships in November 2024 to support the Uber rival in rolling out an AV option in Atlanta in 2025.
Companies Race to Bring the Benefits of AVs to Trucking
Another industry spurring innovation in AVs is trucking. Several companies are making headlines with their efforts to bring AVs’ potential environmental and labor-reduction benefits to the freight sector. Torc Robotics plans to launch its driverless trucks in 2027. The independent subsidiary of Daimler Truck completed a test of its autonomous truck on a multi-lane closed-course at full operating speed in 2024, moving the company closer to its market debut. Waabi plans to roll out its driverless trucks in 2025, and the Canadian startup has secured funding from some of the world’s top tech and automotive companies, including Uber, Porsche, and Nvidia.
As autonomous trucking gets closer to reality, federal and state governments are enacting and updating rules that will determine how driverless trucks operate. In 2023, the Federal Motor Carrier Safety Administration (FMCSA) and the Department of Transportation (DOT) issued a notice seeking public comment on what factors should be considered when regulating commercial AVs. California Gov. Gavin Newsom removed a potential roadblock for driverless truck testing in October 2024 when he vetoed a bill that would have required a driver to be in the vehicle when testing autonomous trucks on state highways.
AV Advancement Will Drive Investment in Cameras, Sensors
As AVs continue to evolve, automakers will need to source more of the technology that makes them possible, from cameras to lights.
In order to comply with the National Highway Traffic Safety Administration’s (NHTSA) 2029 deadline for automakers to implement automatic emergency braking in vehicles, automotive manufacturers will need to increase their investments in radar, lidar, or traditional cameras. The market for long-wave infrared vehicle cameras is expected to grow more than sixfold leading up to the deadline, according to a report compiled by U.K. technology research and consulting firm IDTechEx.
Reshoring
Geopolitical and environmental concerns have spurred automotive manufacturers that sell vehicles in the U.S. to concentrate more of their operations domestically in recent years. This trend is expected to continue in 2025, and 84% of automotive manufacturers said they are likely to add North American products or raw materials suppliers to their supply chain in the next 12 months. In addition to sourcing more supplies from local vendors, manufacturing operations will also shift closer to home. Four out of 10 manufacturers surveyed by Thomas said they plan to actively reshore manufacturing operations in 2025. In addition to operational changes, many manufacturers plan to shift their sourcing to local suppliers.
84% of automotive manufacturers said they are likely to add North American products or raw materials suppliers to their supply chain in the next 12 months.Thomas Automotive Survey, October 2024
Investment in U.S. Operations on the Upswing
The automotive industry has been at the forefront of the reshoring movement of the last several years, in large part due to rising EV production. Toyota invested $1.4 billion into its Princeton, Indiana, plant in April 2024 to fund infrastructure for EV assembly. Polestar began producing its EVs in the U.S. for the first time in August 2024 at a facility near Charleston, South Carolina, owned by its sibling brand, Volvo. Both brands are owned by Chinese company Geely, and Polestar vehicles had largely been manufactured in China until last year. The company began producing its Polestar 3 sport-utility vehicle in South Carolina to avert U.S. tariffs on China-made EVs.
Tariffs on Chinese imports, as well as those from Canada and Mexico, may increase in 2025, according to plans outlined by President-elect Donald Trump, so it is likely manufacturers will continue to move operations to the U.S. To combat the shortage of skilled labor — one of the biggest hurdles to moving more manufacturing to the U.S. — investments in workforce development will play an important role.
“We need more people in America who work in manufacturing. Vocational training is key to that,” Thomas CEO Randy Altschuler said in an interview on CNBC. Investment in manufacturing talent is already on the rise, with an 83% increase in manufacturing apprenticeships over the last decade, according to the Reshoring Initiative 2023 Annual Report.
More U.S. Sourcing Options for Batteries and Semiconductors
Whether or not they plan to increase the percentage of manufacturing done in the U.S., many automotive manufacturers plan to source more materials made in the U.S. in 2025. In addition to the rising number of EV batteries and battery components being produced domestically, the U.S. has been steadily increasing its production of semiconductors. The CHIPS and Science Act, signed into law in August 2022, provides for investments in the domestic production of semiconductors (also called chips), including research and development (R&D), technology hubs, and the STEM workforce.
Rising demand for AVs and EVs is driving the need for more semiconductors in the automotive industry, and the global automotive semiconductor market share is forecast to reach $153.9 billion by 2032, according to Allied Market Research. With the U.S. expected to increase domestic chip manufacturing by 203% over the next decade, U.S.-made chips will account for a significant portion of this growth and provide American automotive manufacturers with many domestic sourcing options.
Manufacturing Innovation
The automotive industry is consistently innovating, and the opportunities presented by sophisticated manufacturing techniques and other cutting-edge technologies have manufacturers optimistic about the industry’s future.
Advanced Manufacturing Technologies Stir Up Excitement
Almost half (45%) of the auto manufacturers surveyed by Thomas said advanced manufacturing techniques, such as 3D printing and robotics, are the automotive innovations they are most optimistic about in 2025.
3D modeling software has been used in automotive design for decades, and auto manufacturers are increasingly employing various 3D printingmethods to create production tools, vehicle components, and even entire cars. There are more than a dozen car models that incorporate metal or plastic 3D-printed parts. For example, Ford uses Stereolithography (SLA) and Selective Laser Sintering (SLS) 3D printing to make handles, charging ports, and other elements of its Electric Explorer. Czinger, a California-based maker of hybrid sports cars, uses 3D printing throughout its production process to minimize waste and create vehicles that are as lightweight as possible.
On the robotics front, companies such as BMW and Mercedes-Benz have announced plans to add humanoid robots to their manufacturing lines to complement existing robotic systems. BMW signed a commercial agreement with autonomous humanoid robot developer Figure in 2024 to create robots to manage certain tasks at its Spartanburg, South Carolina, plant.
Buzz Is Building About New Types of Batteries
New types of electric batteries that use a solid-state electrolyte are the automotive innovation that 41% of manufacturers are most optimistic about in 2025.
Batteries that use a solid-state electrolyte rather than the liquid or gel electrolytes used in traditional batteries — known as solid-state batteries — hold great potential for EVs. Their energy density and long life cycle could help increase EV range and allow vehicles to run longer without a battery replacement, and their reduced risk of thermal runaway minimizes the potential for fires or explosions. These batteries are still in development, but several companies are on the road to releasing solid-state batteries. Samsung SDI announced in 2024 that its pilot solid-state battery production line is fully operational, and Stellantis is partnering with battery manufacturer Factorial to release a line of Dodge Charger Daytona vehicles powered by solid-state batteries in 2026.
Hydrogen-Powered Vehicles Fuel Optimism
While EVs may be the most common type of alternative fuel vehicle (AFV), there are other types of fuel that also offer sustainable alternatives to traditional petroleum fuel. Alternative fuel solutions are the automotive innovation that 37% of manufacturers are most optimistic about in 2025.
When it comes to AFVs, the second-biggest name in sustainable fuel after electricity is hydrogen. Hydrogen fuel cell electric vehicles create zero harmful tailpipe emissions — their only byproduct is water vapor. Hydrogen vehicles can refuel in a matter of minutes and carry enough fuel to drive up to 400 miles, but high production costs and the lack of hydrogen fuel infrastructure have kept them from taking off in the U.S. However, the future for hydrogen vehicles may be bright. As of 2023, there were 59 operational retail hydrogen stations in the U.S., and at least 50 stations were in the planning or construction stage, according to the Department of Energy. Several automakers have plans to debut hydrogen-powered vehicles in the near future. Hyundai will debut a hydrogen-powered FCEV called the Initium in the first half of 2025, and Toyota and BMW have formed a partnership to boost hydrogen technology in vehicles and make them more accessible.
AI Integration Offers a Path to Increased Efficiency
Manufacturers are increasingly turning to artificial intelligence (AI) to aid design, streamline workflows, and maximize efficiency. Three out of 10 auto manufacturers we surveyed said AI integration is the innovation they are most optimistic about in 2025.
In the automotive industry, manufacturers are using AI for everything from improving vehicle designs to controlling robots on the production line. Investment in AI will continue to increase in 2025, and 3 out of 4 manufacturering companies say they are investing heavily in AI, according to a survey conducted by Xometry and Zogby Strategies.
“If you’re a manufacturer…you’re using AI to improve your productivity, to be more efficient,” Alschuler said during his segment on CNBC. “You’re using it to maximize your profitability. All of these things are critical to small business owners.”
Methodology
This survey was conducted over a 28 day period from Oct. 23 to Nov. 20, 2024. A total of 367 respondents participated, and 213 were qualified for the survey.
Invited Participants:
Qualifiers:
- Complete, non-duplicate entry
- Required to work in the automotive sector in North America
Recruitment:
- Respondents were invited to participate via Thomas emails. The invitation pool was
incentivized with an entry in a gift card raffle.