Major Automotive Global Trends - July 2025

USA

The US exempts auto manufacturers from retroactive fines due to not meeting the 2022 fuel consumption targets

American regulators announced in July that they intend to eliminate the requirement for automakers to pay retroactive penalties for failure to meet fuel economy standards starting with the 2022 model year, which is in accordance with the law approved by President Donald Trump.

The new budget law, approved by the House of Representatives and the Senate, eliminates the penalty mechanism established in the 1975 Energy Act within the framework of the CAFE standards (calculation of average fuel economy for each manufacturer's fleet of models). A letter sent to American manufacturers by the National Highway Traffic Safety Administration (NHTSA) indicates that the agency is reevaluating its policy on the subject. This is another step in the Trump administration's overall policy to encourage the production of gasoline vehicles and reduce incentives for EVs. According to estimates by Republicans in the Senate, the decision is expected to save automakers about $200 million.

Environmental groups attacked the decision, saying that "This is a gift to serial polluters, who have used strong political lobbying to erase hundreds of millions of dollars in fines... The American public will pay the price". On the other hand, the main lobbying body of the American auto industry welcomed the move, saying that "The existing standards for reducing fuel consumption are unattainable under current market conditions".

Last year, some automakers paid hundreds of millions of dollars in fines for failing to meet fuel-efficiency standards in previous years. Tesla, for its part, previously reported that its revenue from selling “Environmental credits,” awarded to it for producing zero-emission, fuel-efficient EVs, would total $2.8 billion by 2023. These credits were sold to US automakers seeking to meet emissions targets. The new legislation is set to harm that revenue.

Analysts: The elimination of the EV tax credit in the US will negatively affect the development of EVs in the country

The US EV segment is expected to take a significant hit due to the elimination of the $7,500 tax credit, which is expected to take effect on September 30 of this year, analysts in the US estimated in July. According to the analysis, EVs in the US are generally significantly more expensive than gasoline or hybrid vehicles.

A new report, published by the American research firm Cox Automotive, reveals that the average transaction price of a new EV in May was about $57,700, about $9,600 higher than that of a non-electric vehicle (before incentives). Government subsidies and manufacturer discounts have helped narrow the price gap. Still, despite this, constraints such as limited driving range, a lack of charging infrastructure, and a limited supply of models still limit demand for them.

To this can be added the competition from new, fuel-efficient hybrid versions of popular US models such as the Honda Civic and Subaru Forester, which makes the need to purchase EVs unnecessary for many customers. Analysts say that "Hybrid cars do not require a change in driving style and for many it is a simple alternative to optimize fuel consumption". The average number of days that EVs were in dealer inventory in May was 111, which is about 30 days longer than gasoline and hybrid vehicles.

Analysts estimate that following the new legislation passed by Congress in July (which will end the $7,500 tax credit for a new EV and $4,000 for a used EV by the end of September), a temporary “Buying spree” of EVs is expected. Still, there is a real chance that sales in the segment will decline later this year.

In addition to the subsidy cuts, many electric models are facing rising costs due to tariffs that went into effect in April. Vehicles manufactured in the US also contain many imported components and are exposed to these tariffs. As a result, several automakers have already reduced their investments in the sector, and the market share of EVs is expected to gradually decline by the end of the year, in parallel with their price increases and the end of government subsidies.

Second-hand car prices on the rise following Trump’s tariffs

During June, the Mannheim Index for used car prices in the US, which serves as an early indicator of inflationary pressures, recorded an increase of 1.6% compared to the previous month and 6.3% compared to the same period last year. This is the sharpest annual increase since August 2022.

Analysts in the American automotive market estimate that the high tariffs imposed in the US since April on imported vehicles have caused a general increase in the price of new vehicles, which has had an impact on increasing demand for used cars and increasing prices in the used car market.

They note that although car prices tend to fall in the second half of the year, retail demand remains high while the inventory of vehicles that have ended their leasing period is small, and these two factors tend to maintain high price levels.

The US imposes a 93.5% customs tax on Graphite and Copper imported from China. The auto industry fears a shock in the supply chain for EVs

During June, the US Department of Commerce announced its intention to impose an "Anti-dumping duty" of 93.5% on graphite and its products imported from China. The decision came following a request by senior executives in the US battery component industry to the US Department of Commerce last December, requesting an investigation into whether Chinese companies were violating trade protection and competition laws. The request was followed by an investigation by the US Department of Commerce, which determined that the Chinese government was providing unfair subsidies to local graphite producers.

The move has caused widespread repercussions in the automotive industry, which uses graphite as a raw material for EV batteries. It should be noted that the new tariff is expected to be added to existing tariffs, bringing the total tax rate on this mineral to an extraordinary level of 160%. The move is expected to exacerbate pressures on the global supply chain in the EV sector, which is already dealing with export restrictions from China on critical minerals and battery technologies. According to industry estimates, Western car manufacturers, which rely on Chinese graphite, are expected to suffer a surge in costs.

Analysts estimate that the increase in tariffs on Chinese graphite will lead to an average increase of $7 per kilowatt-hour in the price of car batteries and that the move could completely wipe out the profits of Korean battery manufacturers in the next quarter or two.

Major companies, including Tesla and its battery supplier Panasonic, have already expressed strong opposition to the move, claiming that the domestic graphite industry in the US has not yet reached the stage of maturity in terms of both production capabilities and the level of quality required for the automotive industry.

According to research firm Bloomberg NEF, the volume of graphite imports into the US last year was almost 180,000 tons, with about 66% of them coming from China. A report published in May by the International Energy Agency (IEA) noted that graphite is at the top of the list of minerals most vulnerable to supply disruptions due to Chinese dominance in the processing of the material.

The agency estimates that graphite will remain a key material in the production of anodes for lithium-ion batteries at least until the end of this decade. Silicon-based materials are expected to begin to capture market share only after 2030. The US Department of Commerce confirmed the initial decision in an official document, published on July 17, with the final decision on the matter expected to be made after hearings with interested parties by December 5.

In July, the Trump administration also announced a 50% tariff on imported copper. This move was also met with concern in the industry, with executives warning that it would further burden production costs at a time when manufacturers are already struggling with high steel and aluminum prices.

The US relies heavily on imported copper, aluminum, and steel, and building new domestic manufacturing infrastructure takes years. As a result, metal prices have risen sharply. The price of copper, a critical raw material for vehicle electrical systems, soared to a record high of $5.6820 per pound (about 450 grams) in New York trading.

Analysts estimate that a typical gasoline or hybrid vehicle contains about 24 kilograms of copper, while producing an EV requires about 59 kilograms of the metal. The rising costs are causing suppliers to raise prices for automakers.

A senior source at a US parts supplier said that rising prices for copper, steel, and aluminum are having a “Significant impact” on the cost structure and that tariffs on these raw materials will translate into higher costs for the American consumer.

Steel prices have quadrupled since 2018, and that alone is leading to investment delays and reduced hiring. Before the tariffs, these three metals accounted for 5% of the total cost of producing a car. Now, it’s 9%. It is estimated that every vehicle made in the US will now carry an additional cost of at least $1,700, while vehicles imported from Canada or Mexico will increase in price by up to $3,500. Vehicles from other countries will increase in price by up to $5,700.

The impact on the profitability of the auto industry is expected to be significant because profit margins in the industry are already low. The average price for a new car sale in the US reached about $46,200 in June. However, the industry continues to believe that the tariffs will be eliminated because President Trump has already postponed and even canceled tariffs for political reasons.

Europe

The US and the EU signed a trade agreement at the “Last minute”. Auto exports from Europe will still be penalized by a 15% customs tax

At the end of July, just before the deadline for imposing punitive tariffs on imports of goods from the EU to the US, the European Union and the US government signed a new trade agreement, which is a compromise. The main clause in the agreement imposes a 15% tariff "Only" on many goods manufactured by the EU, exported to the US, including new vehicles and spare parts.

Although this is still a significant tariff, compared to the American threat to impose a 30% tariff in early August by default, it is a better alternative. Furthermore, this is a tariff rate, which constitutes a tariff ceiling and not a tariff that will be added to existing taxes. The agreement also includes mutual exemption from tariffs on raw materials, semiconductors, and more, but this has no direct impact on the automotive industry.

On the other hand, the EU was unable to convince the US government to waive a 50% tariff on steel and aluminum exports from Europe to the US, which could still increase costs for European car manufacturers. However, the agreement includes a future option to switch to a quota-based taxation system.

In addition, the EU has committed to purchasing US energy products worth around $750 billion over the next three years, in addition to investments worth around $600 billion in the US during President Trump's term. There has already been criticism in Europe of the European Commission's "Folding" in the face of US pressure, and shares of major European car manufacturers fell when the agreement was announced.

The EU Commission is mulling obliging commercial vehicle fleets to switch to 100% EV by 2030

In July, European media reported that the European Commission was formulating a proposal to oblige rental, leasing, and business fleet companies operating in the EU to purchase only EVs starting in 2030. The proposal is expected to be presented for public debate only at the end of the summer, but it is already generating opposition.

It should be noted that in March of this year, the Commission announced its intention in principle to increase the penetration of EVs into fleets, as part of a package of measures to support the European automotive industry. However, concrete details were also published in early July regarding the intention to set a graduated target of 75% electric car purchases by 2027 and 100% by 2030.

The EU confirmed that Brussels is indeed working on a new regulation on the subject, but did not provide further details. If an official proposal for such a regulation is indeed submitted, it will have to go through a full "Parliamentary process", including approval by the Council of the Union and the European Parliament.

In Europe, it is estimated that this regulation could have a wide impact because about 60% of new vehicles sold in Europe each year are registered in the names of companies and fleets.

Political and economic figures within the EU have sharply criticized the move, claiming that it "Will lead to vehicle purchases only to meet quotas, and not out of real need". Senior executives at leasing companies have also expressed opposition, saying that the decision will only exacerbate the real problem, which is ongoing delays in establishing public charging infrastructure and the very slow existing infrastructure in the EU.

The French government brings back the subsidized EV leasing program for low-income households

The French government has announced the renewal of the "Social leasing" program for EVs, which was suspended in February 2024. The current budget is €370 million and is intended for approximately 50,000 vehicles. Eligible applicants will be able to apply starting September 30.

The first round of the program, which began in 2024, lasted only a month and a half and was canceled due to exceptional demand, which exhausted the previous budget of 650 million euros. The previous program offered the low-income group the opportunity to lease an EV for just 50 euros per month, which amounted to a subsidy of 13,000 euros per vehicle. The new edition focuses on a weighted subsidy of up to 7,000 euros per vehicle.

The program is intended for French citizens whose annual taxable income is less than 15,400 euros and who need a work vehicle. In addition, about 5,000 vehicles will be allocated to residents in areas with particularly high air pollution. The government hopes that companies participating in the program will offer eligible individuals a leasing program with a payment of up to 140 euros per month, which is lower than the ceiling set at 200 euros.

The subsidy will be financed through energy efficiency certificates (CEE) instead of a direct government budget. The direct environmental subsidy for the purchase of an EV for the general population was previously cut to €2,000–4,000, depending on income. It should be noted that in 2025, there was a 7.1% decrease in EV deliveries in France, apparently due to the impact of the subsidy cuts.

The German political system is also showing interest in the French model, and the SPD party has confirmed that it is considering promoting a similar program. However, it could only be implemented in 2027, after the European Climate Fund budgets are available.

China

The Chinese government is expanding the tax threshold on luxury vehicles, which will apply to vehicles priced at around 900,000 yuan (around $126,000) and, for the first time, also to  luxury EVs

In mid-July, the Ministry of Finance and the China National Taxation Administration issued a joint statement on a significant revision of the purchase tax on luxury vehicles. The decision, approved by the State Council, came into effect a few days later and marks a new stage in the government’s regulation of the luxury car market.

The main clause in the revision is the reduction of the tax threshold from 1.3 million yuan (about $182,000) to 900,000 yuan (about $126,000). The change is expected to increase the price of many models currently in this price range, including key models from leading luxury brands.

The guidelines also define for the first time precisely the tax rules for different types of luxury vehicles and expand the tax application to include EVs and fuel cell (hydrogen) vehicles, both private and commercial. However, for luxury vehicles with electric or fuel cell propulsion, the tax will be collected only at the time of retail sale, unlike vehicles with ICE engines, which are taxed in China both at the production (or import) stage and at the retail sale stage. The goal of the new balance is to maintain fair competition while supporting the EV industry.

The used luxury car market is also expected to benefit from the relief. According to the new tax policy, the sale of a used luxury car will not be taxed, regardless of its original price or the date it was put on the road. The definition of a "Used car" applies to any vehicle that has been owned and is in use until the date it must be scrapped in accordance with regulations.

At the same time, the announcement refines the basis for calculating the tax at the retail stage. Any payment collected more than the base price of the vehicle (such as for optional equipment packages or related services) will be considered part of the sales price for tax purposes. The purpose of the directive is to close loopholes and prevent tax evasion.

Imported luxury cars will also be subject to the same new tax threshold. The main victims of this are expected to be European luxury cars, mainly German ones, which currently dominate the super-luxury market in China.

The Chinese government limits the export of technologies vital for EV batteries

The Chinese government has updated its list of technologies it imposes export restrictions on, adding battery cathode technologies, including lithium iron phosphate (LFP) batteries (the most popular battery type in the global EV market) and lithium manganese iron phosphate batteries. Exports of these components will now require a government license, which could have implications for the global supply chain, depending on how the Chinese government decides to implement this policy in its trade relations. According to a statement from the Chinese Ministry of Commerce, “The move is intended to balance economic development with national security”. The restrictions also apply to other technologies related to EVs, such as lithium carbonate production and gallium production.

Analysts estimate that the move could have a significant impact on the European automotive industry, which currently relies on Chinese LFP batteries for the production of cheap, high-volume vehicles. Such batteries, manufactured outside China, also make extensive use of Chinese-made components, which may be affected by the move.

In Europe, it is noted that although the export of these components has not been completely banned, the process of issuing export licenses in China may, in any case, be inconsistent. In the past, there have been reports of cancellation of issued licenses and delays in issuance, which stem from the lack of an effective licensing mechanism.

India

India and the UK have signed a free trade agreement that includes substantial discounts on imported vehicles

In late July, Britain and India signed a free trade agreement after nearly three years of negotiations. The agreement, which was signed against the backdrop of an escalating trade war with the US, will grant exemptions or concessions in tariffs on a wide range of products, including private cars, commercial vehicles, and trucks (although subject to quota restrictions).

According to the agreement, tariffs on internal combustion engine (ICE) vehicles will be cut to 30% to 50% in the first year of implementation, subject to an import quota of up to 20,000 vehicles per year. Tariffs will be gradually reduced over the next 15 years to just 10%, with a quota of up to 15,000 vehicles.

Imports of vehicles over the quota will be subject to tariffs of 60% to 95% in the first year and 50% after ten years. India currently imposes a tariff of 70% to 110% on vehicles imported from the UK, while trucks are subject to tariffs of 40% to 50%.

The quantitative quotas were imposed to protect the Indian car market from flooding. Vehicles from British manufacturers that are not manufactured in the UK itself will not benefit from the agreement. With regard to EVs, it was determined that they will benefit from a complete exemption from tariffs in both countries, as long as their price to the importer (CIF) is less than £40,000. EVs, valued between £40,000 and £80,000 to the importer, will be subject to a reduced tariff of 50% with a quota limit of up to 400 vehicles per year.

EV manufacturers in India will also benefit from similar conditions, if and when they begin exporting vehicles to the UK. It should be noted that in the last two years, vehicle exports from Britain to India have fallen by 76% and amounted to only about $72 million.

UK

The UK government renews the subsidy plan for EVs and allocates up to £3,750 to buyers

On July 15, the British Transport Minister announced a new government subsidy program with a budget of £650 million, under which incentives of up to £ 3,750 will be awarded to buyers of new electric vehicles. This is a key step in the government's "Change Plan", which is designed to make it easier for the middle class and make EV ownership accessible to tens of thousands of families.

The program will support the purchase of models from British and international manufacturers, provided they meet sustainable production standards. It is part of the UK's national target to stop selling new petrol and diesel cars by 2030 and will apply to new vehicles, priced up to £37,000. Receiving a discount on the list price will be possible immediately at the time of purchase. Registration for applications for the program opens on July 16, 2025, and funding is scheduled to continue until the 2028–2029 fiscal years.

It should be noted that the UK government is currently facing public criticism over the high entry prices of EVs in the country compared to ICE vehicles. The subsidy is expected to reduce this gap and save buyers up to £1,500 a year in fuel and maintenance costs. Together with existing tax benefits, this represents a historic cost reduction in the UK EV market.

As part of the UK government’s transport strategy, £1.6 billion has already been invested in upgrading infrastructure, including road improvements, a freeze on fuel tax until 2026, and the installation of charging points. The government has also invested a further £63 million in installing charging points in shared homes without private parking, electrifying the NHS fleet, and building charging points at logistics centers.

The UK leads Europe with the largest EV market, growing by 20% year-on-year. According to the Association of British Motor Manufacturers, in the first half of 2025, there was a 34.6% increase in EV deliveries to 224,841 vehicles, representing 21.6% of all sales; however, this figure is still below the government’s target of 28% for this year.

The number of public charging points across the UK has passed the 82,000 mark, with another new station opening every half hour on average. At the same time, emissions regulations have been adjusted in light of new trade agreements between the UK and the US, India, and the EU.

Japan

During July, the US government agreed to reduce customs tariffs on Japanese cars significantly

On July 23, it was reported that the US and Japan had reached a trade agreement, which includes a reduction in tariffs from 25% to 15% on car imports from Japan without restrictive quotas. The agreement, reached after months of negotiations, was positively received in the auto industry and led to an increase in the share prices of automakers in Japan, Korea, and Europe.

One reason is renewed optimism about the chances of success of a similar agreement, which the EU has been trying to reach with the US before August 1, the date when American tariffs were expected to increase. In Europe, they are seeking to include tariff reductions, export quotas, and tax benefits in the agreement. In 2024, Europe exported 758,000 vehicles to the US, most of them luxury vehicles. This is an export volume four times larger than the volume of American car exports to Europe.

However, auto industry groups have criticized the agreement with Japan, claiming it is discriminatory because the US imposes a 25% tariff on vehicle imports from Mexico and Canada.

The tariffs on Japan have not been completely eliminated, and President Donald Trump aims to cut the US trade deficit with Japan, which stood at about $68.5 billion in 2024. However, he has softened his stance due to concerns about the inflationary impact after Japanese automakers began raising prices in the US market amid the increasing difficulty of dealing with tariff costs.

Meanwhile, Japanese automakers are continuing to work to deepen their presence in the US. Mazda has already announced that it expects to increase production in the US, which is its main target market. Subaru also plans to expand its operations in the US. Honda, for its part, is considering a collaboration with Nissan, which could allow it to use idle Nissan plants in the US to produce pickup trucks.

Preliminary data, published by the Japanese Ministry of Finance in July, showed that the total value of vehicle exports from Japan to the US, in Japanese currency, fell 25.3% in June compared to June last year. This is the third consecutive monthly decline and is recorded despite the fact that the volume of vehicles exported recorded an increase of about 4.6%.

The US is Japan's largest car export market, and the imposition of a 25% tariff on imported vehicles, which came into effect on April 3, led to a severe blow to Japanese exporters.

According to analysts, after the imposition of the tariffs, Japanese automakers adopted a policy of aggressive price cuts in an attempt to maintain their market share in the US. The gap between export value and volume is explained, among other things, by the strengthening yen, since prices are denominated in dollars. Still, it is mainly attributed to a significant reduction in the prices of the vehicles themselves. It seems that automakers have chosen to absorb the costs of the tariffs to remain competitive.

South Africa

Car export from South Africa to the US plunges following the Trump administration's tariffs

The National Association of South African Automobile Manufacturers (NAAMSA) reported in July that following the Trump administration’s imposition of a 25% tariff in April, the country’s auto exports to the US fell by 73% in the first quarter of 2025. In April and May alone, the decline was around 80%.

The US is South Africa’s second-largest trading partner and a major destination for automotive exports. For years, South African exporters have enjoyed tariff exemptions under the African Growth and Opportunity Act. This exemption was removed with the imposition of the tariff in April and is now expected to worsen with the Trump administration’s announcement of another round of tariffs, up to 30%, on some countries, including South Africa, starting August 1. These tariffs will be added to those already imposed in April.

Before the second wave of tariffs, the South African government tried to reach a compromise with the US and proposed a trade package, which included an export quota of 40,000 vehicles per year without tariffs. However, the move did not receive cooperation from the American side. According to the CEO of the local Automobile Manufacturers Association, the new tariffs are not just a trade problem but a socio-economic crisis in the making, which will endanger thousands of jobs and entire communities, that could collapse economically. According to him, if access to the American market is not maintained, industrial centers in South Africa could become ghost towns. In addition, he noted that increasing global competition is already forcing car manufacturers to consider reducing production and freezing future investments in the country.

South Korea

American tariffs are damaging the financial results of Korean auto makers, pushing them to manufacture parts in the US

As of late July, the South Korean government had still not reached a compromise agreement with the US regarding the tariffs imposed on Korean exports, especially on vehicle exports. This fact creates heavy pressure on it to offer a compromise arrangement similar to that agreed between the US and Japan.

Meanwhile, quarterly reports from car exporters in the Korean automotive industry already reflect the severity of the tariffs in the US.

Meanwhile, there are concerns in Korea that the Hyundai Group's move to establish a local supply chain in the US to circumvent tariffs is expected to significantly harm the local industry. Currently, about 36.2% of Korean vehicle parts are manufactured in Korea and exported to the US, and moving the supply chain to the US is expected to particularly harm small and medium-sized companies, which are suffering from weak business results and are having difficulty raising resources to move to overseas operations.

In July, Hyundai announced that it had established a dedicated team (TFT) to examine procurement methods for about 200 spare parts items as part of the move to purchasing in the US in the medium and long term, in collaboration with KIA.

In April, the Trump administration in the US imposed a 25% tariff on imported vehicles and spare parts, and Hyundai estimated that 20% of its losses in the second quarter were due to tariffs on parts imported from outside the US. Korea warns that although the parts industry must expand into foreign markets, the financial situation does not allow for investment. Therefore, forced streamlining and even business closures are expected with painful consequences for the local economy.

Israel

The Ministry of Finance will soon reveal its plans regarding usage tax, mileage tax, and purchasing tax for EVs

During July, it was announced that the Ministry of Finance is expected to soon publish its plans for a follow-up reform to the tax on the value of use of a connected, reduced-emission vehicle, the level of the purchase tax on an EV in early 2026, and the implementation of a mileage tax in 2026.

In recent months, the Ministry of Finance has been under pressure to increase transparency and clarify the planning horizon regarding the import and purchase of reduced-emission vehicles, especially electric ones. In May, a letter was sent to the Chairman of the Finance Committee, stating that "The data for the first quarter of 2025 indicate a sharp decline in demand for EVs, with an emphasis on fleet and leasing companies, due to the uncertainty surrounding the continuation of the value of use benefit. The uncertainty is harming demand for EVs by employees, fleets, and leasing companies. In addition, it is important to deepen the discount on the value of use for electric commercial vehicles."

It should be noted that in response, in a discussion held in the Finance Committee in June, a representative of the Tax Authority promised to present a reform of the usage value to the committee shortly, in parallel with the publication of a memorandum for public comments.

During July, a letter was sent to the Treasury on the subject from the Director General of the Ministry of Energy, Yossi Dayan. He noted the decrease in EV deliveries this year due to the increase in the purchase tax and due to the increase in licensing fees for EVs and requested that a new, long-term outline be established for the purchase tax on EVs, within the framework of which, no further increase in tax rates on EVs will apply in the coming years and the usage value incentive on them will be extended for 5 years.

The economic press reports that, according to Treasury estimates, there is currently doubt whether the mileage tax on EVs will indeed come into effect in 2026, due to the opposition of the Minister of Finance and the proximity of the elections. However, no alternative budgetary source has yet been found for the revenues from that tax, which were estimated at approximately 1.3 billion NIS in 2026.

In addition, the purchase tax on EVs may also be frozen in 2026 at 45% due to technical reasons. Unless the mileage tax is indeed abolished, the Ministry of Finance may press for a significant increase in the purchase tax as compensation. In addition, a "Technical" freeze of the purchase tax on EVs at 45% may apply, at least in 2026.

Furthermore, before that, the Ministry of Finance is expected to publish a new outline for purchase tax benefits on electric, hybrid, and plug-in vehicles. Initial estimates expect an increase in the usage value benefit for EVs, as it has been significantly eroded in recent years due to rising vehicle prices.