The global car industry is entering a decisive decade. electric vehicles, shifting trade flows and new manufacturing leaders are redefining how cars are made and sold. According to the International Energy Agency’s latest report, What Next for the Global Car Industry, the sector is being reshaped faster than at any point in its history, with major consequences for economies, jobs, and competitiveness.
Electric Vehicles Move Into the Mainstream
A central finding of the report is the speed at which electric cars are gaining ground. The IEA notes that more than one in five cars sold globally is electric. A milestone was reached far earlier than many forecasts predicted. This rapid uptake marks a structural shift for the global car industry, which was built over decades around internal combustion engine technology.
Electric vehicles demand different supply chains, skills, and production processes. While they currently represent a minority of the total vehicle fleet. Their momentum is forcing manufacturers to rethink long-term investment plans, factory layouts, and supplier relationships.
China’s Expanding Role in Production and Trade
China’s influence looms large throughout the report. In 2024, the country produced 27 million cars, a record level, and became the world’s largest car exporter. The IEA highlights that China now accounts for more than half of global car sales growth, reflecting a broader shift of demand toward emerging economies.
Cost competitiveness is a major factor. Chinese manufacturers benefit from scale, tight supply-chain integration and lower battery costs, particularly for lithium iron phosphate batteries. These advantages have allowed Chinese brands to compete aggressively on price, putting pressure on established players across the global car industry.
Why the Sector Still Matters Economically
Despite the disruption, the car sector remains a cornerstone of industrial economies. The IEA estimates that car manufacturing contributes between 2 percent and 6 percent of GDP in leading producer countries. Every dollar of output generates about 70 cents in additional economic activity, underlining the industry’s multiplier effect.
Production is concentrated in powerful regional clusters. While traditional hubs like Detroit and Nagoya remain vital, Shanghai has emerged as a dominant center for battery manufacturing, hosting dozens of factories and a significant share of global capacity. These clusters shape competitiveness across the global car industry.
Conclusion: A Race Defined by Cost and Strategy
Looking ahead, the report makes clear that success will depend on lowering EV costs and scaling production. The IEA points to five priorities, including stimulating demand, expanding battery manufacturing, securing critical minerals and reducing energy costs. There is no single path forward, but the direction is clear.
The global car industry is no longer defined by incremental change. It is a fast-moving contest where technology, policy and economics intersect, and where the winners will be those able to adapt quickly and compete on cost.
As the transition accelerates, the global car industry is set to remain one of the most closely watched sectors in the world economy. Follow Arabwheels now!