Major Automotive Global Trends - November 2025

Global

Global trade war: the US and South Korea formally announced a new trade agreement, which includes “only” 15% tariff on vehicles imported into the US from South Korea

After the US signed a new trade agreement with Europe and Japan, it was South Korea's turn. After negotiations that lasted almost three months, South Korea and the US released official details of the new trade agreement they had signed in November.

According to the joint statement of the two countries, an agreement was reached to reduce tariffs on vehicles and auto parts imported from South Korea to the US from 25%, as unilaterally set by the US in April of this year, to "only" 15%. This brought the level of the tariff imposed on imported vehicles made in South Korea to the level of the tariff imposed on vehicles made in Japan.

The South Korean government has stated that when the trade agreement officially enters into force, and South Korea's $350 billion investment plan in the US is submitted to the National Assembly of Korea, tariffs will be reduced retroactively as of November 1. The US has also pledged not to impose tariffs higher than 15% on wood products and pharmaceuticals imported from South Korea, while no tariffs will be imposed on aircraft parts and generic drugs.

In the field of semiconductors (chips), the US has pledged to grant South Korea trade terms no less favorable than those agreed in any future agreement between it and other countries, notably Taiwan, which is South Korea's major competitor in the global chip market. In addition, South Korea and the US have agreed to jointly remove additional trade barriers in the areas of agriculture and digital services.

The two countries agreed that from the $350 billion Korea-US investment fund, which was agreed upon, it would inject $200 billion in cash, and, in stages, with an annual investment cap of $20 billion. This is in order to maintain the stability of the Korean won exchange rate. The remaining $150 billion will be allocated to joint projects for the two countries in the shipping sector, including loans and guarantees to finance shipbuilding, along with private sector investments.

Shortly after the joint statement, South Korea's ruling party submitted a special bill to parliament, aimed at formalizing the commitment to invest $350 billion in the US. South Korean officials stated that the bill clarifies the implementation details of the investments they have committed to and that its submission is a precondition agreed upon with the US for reducing US tariffs on South Korean vehicles from 25% to 15%.

South Korea's Ministry of Finance stated that with the introduction of this special bill, the policy of reducing tariffs on vehicles and auto parts from 25% to 15% meets the conditions for retroactive application, with the retroactive date starting from November 1. It also notified the US Department of Commerce of the said measures and requested that a notice be published in the Federal Register immediately, to enable the tariff reduction in accordance with the agreement.

South Korean government data shows that the country's vehicle exports reached $70.8 billion in 2024, with the US market accounting for nearly half of exports. Therefore, the tariff reduction is essential for South Korean automakers.

It should be noted that Japan also signed a memorandum of understanding with the US in September, which ultimately led to the reduction of tariffs on Japanese vehicles exported to the US to 15%, giving them a temporary advantage over Korean vehicles.

At the same time, Hyundai Motors Group, Korea's largest car manufacturer, announced its intention to increase its vehicle production in the US by 80% by the end of the decade in order to reduce the burden of tariffs. Company executives said the move was "A task of the highest urgency”.

Hyundai Group currently produces only about 40% of the total vehicles it sells in the US, while Toyota's ratio is about 50% and Honda's is 80%. At the same time, the company is preparing to increase its exports and sales in other markets, mainly Europe and Asia, in the short term, to compensate for the expected decline in sales in the US.

Hyundai's statement of intentions to transfer production resources to the US is causing unrest among Korea’s workers' unions that are already feeling the effects of the trade war. Among other things, in November, GM Korea announced that it was immediately closing service centers for local GM vehicles throughout the country.

Europe

Stellantis CEO: The EU should enable car manufacturers to calculate 2030 emission targets based on a 5-year average

In November, Stellantis Chairman John Elkann called on the European Commission to relax its policy on emissions targets at the end of the decade. He said that the interim targets for 2030, set by the EU, must be changed and allow manufacturers to calculate the average emissions over several years.

In an interview, Elkann said that the European car industry should be allowed to achieve the emissions targets over a five-year period between 2028 and 2032. This is according to the format of the arrangement, which was concluded between car manufacturers and the Commission earlier this year, which allows the average emissions set for 2025 to be calculated over the period between 2025 and 2027.

He said a similar arrangement should apply to both private cars and light commercial vehicles. However, he added that light commercial vehicles should have separate regulations and their carbon emission reduction targets should be different from those of private vehicles.

He also reiterated a number of proposals, which had been put forward in the past, including formulating a broad scheme for scrapping old and polluting vehicles in the EU to reduce emissions and strengthen the car industry, as well as establishing incentives to reduce the prices of cars sold in the EU.

In the interview, he stressed that Stellantis does not seek to change the EU's ultimate goal of reaching "Zero emissions from new cars by 2035, but he hopes that plug-in vehicles and vehicles powered by "Alternative" and reduced-pollution fuels can continue to be sold in the EU after 2035.

Elkann called on the European Commission to include all these plans in a package of proposals, which it plans to publish later this year as part of the periodic revision of carbon emissions regulations for the automotive industry.

The ACEA calls on the European Commission to change its policy for reducing emissions in the coming years. 

The European Automobile Manufacturers Association, ACEA, published a new position paper in November, calling on the European Commission to re-examine the emission reduction targets for vehicles, especially those for commercial vehicles.

According to the position paper, Europe’s CO2 reduction targets for 2030 and 2035 are increasingly out of reach, and the Commission should therefore adopt a smarter and more realistic approach, which recognizes the challenges facing commercial vehicles and supports a competitive and sustainable transition to zero-emission transport.

The association notes that the current growth rate of the private and commercial BEV market indicates that the original CO2 reduction targets set for 2030 and 2035 are no longer achievable. While automakers remain fully committed to the goal of climate neutrality from transportation by 2050, and see electrification as the primary path to achieving it, the supporting system, which includes infrastructure, incentives, and the development of the battery value chain, as well as consumer demand, cannot meet the goal of zero tailpipe emissions within a decade.

ACEA argues that the EU's exclusive focus on promoting BEVs is endangering Europe's industrial competitiveness and strategic autonomy. According to the organization, the EU is currently only just starting to establish its own value chain for the production of batteries for EVs, and weak consumer demand means that car manufacturers are struggling to sell EVs in the required volume. This situation threatens growth and jobs in the long term. The problem is particularly acute in the electric commercial vehicle segment, where demand in the EU's main markets is even too low to meet the 15% CO2 reduction target set for 2025.

The ACEA calls on the Commission to adopt a realistic and pragmatic approach, including not only setting general emission reduction targets but also more significant infrastructure targets, regulatory reforms for vehicle-to-grid integration (V2G), and ongoing incentives. In addition, the organization calls for the establishment of emission policies that are tailored to different vehicle segments, including commercial vehicles and trucks.

European organizations propose a “Roadmap” for developing a European battery industry in the coming years

In November, one of the most ambitious initiatives for the development and regulation of automotive batteries in the coming years was launched in Europe. The project partners are the "European Association for Advanced Lithium Batteries" and the "Battery Partnership of Europe". Its goal is to bring about cooperation among the member states of the EU in order to establish an "Eco System" for the independent development and production of advanced batteries.

As part of the move, a report was presented, outlining a roadmap for the future of the European battery industry. The study notes that the European battery industry is currently at a crossroads and, despite a high-level industrial and research base and leading academic knowledge in the field, the competitive gap between Europe and the US in the battery sector is currently widening significantly, aided by extensive support from the American government for the local battery industry.

According to the report, without decisive collective action by Europe, it will lose control of the battery industry value chain. The report calls on European decision-makers to strengthen European R&D and innovation in the battery sector in several areas:

•  Investing in the development of advanced battery chemistries, including solid-state batteries.

•  Digitizing battery manufacturing processes.

•  Allocating appropriate resources to build an independent battery industry in Europe, including allocating €500 billion over the next 15 years through a “European Battery Ecosystem Fund”.

•  Formulating a clear strategy that prioritizes the procurement of European-made batteries.

• Ensuring an independent supply chain for batteries in Europe, including gaining control over raw materials and providing incentives for their local processing.

The EU grants millions of euros to electric and hydrogen charging infrastructure

The EU continues to promote the establishment of green transport infrastructure, and in November, the European Commission completed a new round of funding for alternative fuels infrastructure, which will be allocated to around 70 projects. These will receive grants totaling more than €600 million for electrification and emission reduction.

The funding is part of the Master Plan for the Transformation of Road, Maritime, Inland Waterways, and Air Transport of the Trans-European Transport Network. The 70 selected projects span 24 EU countries, and their stated aim is to provide infrastructure for the supply of alternative energy sources for transport. Among them are charging stations for EVs, hydrogen refueling stations, power supply facilities, and ammonia and methanol storage facilities.

Among other things, funding is being provided for more than 1,000 new charging points at a rate of 150 kW for private and commercial vehicles, 2,000 charging points at a rate of 350 kW for heavy commercial vehicles, and 586 charging points at a rate of 1 MW for trucks, etc. In addition, the installation of 38 hydrogen refueling stations for cars, trucks, and buses is being subsidized.

The largest single grant, 61.5 million euros, will be awarded to the French company Voltix, which intends to invest more than 205 million euros in the installation of charging stations with an aggregate capacity of 288 MW for heavy commercial vehicles in 45 locations in several countries, notably France, Spain, the Netherlands, Denmark, Sweden, Austria, and Germany.

The UK intends to provide further subsidies for EVs, but also to impose a mileage tax

The UK government is expected to increase subsidies for EV buyers and anchor them in its budget until 2030. However, at the same time, it is also considering imposing a mileage tax on EVs at a level similar to the excise tax imposed on petrol and diesel vehicles.

The new UK government budget, published in November, allocates an additional £1.3 billion (about €1.48 billion) to subsidize EVs and £200 million for charging infrastructure.

However, the same budget also calls for a discussion on the introduction of a mileage tax, which could increase the annual running cost of EV owners by an average of £276. The tax, if imposed, would be based on the actual distance travelled by the vehicles and would come into effect in 2028.

The UK government is currently looking at ways to tax EVs to make up for the expected loss of billions of pounds in fuel excise revenue, derived from the accelerated transition to EVs in the country. The proposed mileage tax is expected to bring in around £375 million a year to the state based on the number of EVs currently registered in the UK.

The new subsidy budget is expected to join the UK government's existing EV grant scheme of around £650m, for the period from mid-2025 to the 2028/2029 financial year. Currently, private electric models with a list price of up to £37,000 (around €42,000) receive a subsidy of up to £3,750 per vehicle.

The additional amount is intended to extend the funding until the end of 2030 and increase the grant amounts gradually. Although the UK was the largest market for EVs in Europe in 2024, the current growth in demand is not in line with the government's targets.

Under existing legislation, car manufacturers must meet annual sales targets to avoid fines. However, in 2024, manufacturers only managed to meet the government's targets thanks to significant discounts. As a result, in April 2025, the targets have been eased, and now, with the help of the increased subsidy, the market is set to recover.

USA

From shortage to surplus: The American auto industry is facing excess production capacity for EV batteries

The construction of factories around the world to produce EV batteries is progressing faster than the growth rate of their sales, creating a supply surplus. The risk is currently particularly pronounced in North America, according to a new report by the American consulting firm AlixPartners.

According to the report, by 2030, the volume of production of EV batteries in the world is expected to be three times greater than demand, and if all the planned factories in North America are operational by 2030, battery production capacity will increase four times from the current level. As a result, the global EV battery manufacturing sector may face a significant supply surplus.

Giant Chinese suppliers currently account for about 70% of the global EV battery market, and to combat them, President Biden initiated government tax incentives designed to boost demand and encourage investment in the domestic American supply chain.

However, in practice, the adoption rate of EVs in the US is lower than expected, in part due to policy changes led by the Trump administration, which include the elimination of tax breaks for EV buyers and the easing of environmental standards that previously encouraged a shift to EVs.

Data from the National Renewable Energy Laboratory in the US shows that as of September this year, over 1,000 battery-related projects are active in the US. The slowdown trend is also being felt in Europe, when Swedish battery manufacturer Northwolt, which supplies major automakers, filed for bankruptcy.

US auto industry executives have been summoned to provide Congress with "Clarifications" on the high prices of cars in the US

In November, American media reported that senior executives from the American auto industry had been summoned to Congress to present their position on the sharp increase in the prices of new vehicles in recent years, which is limiting their accessibility to large segments of the American population.

The Stellantis Group confirmed that it had received the invitation but declined to comment further, while spokespeople for American automakers said that their companies were “Reviewing the invitation.” This is the first time that industry executives will appear together in Congress since the great economic crisis of 2008, which almost led to the collapse of the industry.

The hearing before the Congressional Commerce Committee is scheduled for January 14, 2026, and will focus, among other things, on the impact of emissions regulations and EVs on vehicle prices. Politicians in the US are concerned about the sharp increase in the average price of new vehicles in recent years.

Ted Cruz, chairman of the Congressional Commerce Committee, also stated that the hearing is intended to investigate how US government intervention is causing a continuous increase in vehicle prices, making them unaffordable for many American consumers. He noted that the average price of a new private car in the US has more than doubled in the past decade.

Industry data shows that the average price of a new car in the US, after manufacturer discounts, has risen from $24,296 in 2015 to more than $50,000 today. As a result, many customers are choosing to postpone vehicle purchases or to purchase used vehicles.

Currently, US automakers are facing additional pressures that are pushing up the pricing of their vehicles, including tariffs imposed by the Trump administration on imported cars and auto parts, aluminum, and steel.

The Congressional Commerce Committee is currently trying to advance tax legislation that would eliminate retroactive penalties for automakers that fail to meet US fuel economy standards starting in 2022. In addition, legislation is being advanced that would allow consumers who purchase new US-made cars to receive an interest exemption on financing for the purchase of a new car of up to $10,000.

Following the termination of EV subsidies, new car inventory in the US rose in November to 3.14 units

In early November, the inventory of new cars in the US rose to 3.14 million units, compared to 2.8 million vehicles the previous month. The average inventory cycle (the number of days that cars are in dealers' inventory) rose from 67 days to 70 days for all models and to 107 days for EVs, almost double compared to October. This is according to data from Lotlinx, a company that provides inventory management services to car dealers in the US.

New car inventory levels in the US usually tend to rise at the end of the year due to model replacements and the flow of inventory by car manufacturers in preparation for holiday production breaks. However, this time, it is an especially sharp increase, mainly due to the expiration of the federal tax credit of up to $7,500 on EVs at the end of September. This is one of the first indications that predictions of a sharp and sustained decline in demand for EVs in the US following the regulatory change are indeed coming true.

It should be noted that in October, there was already a sharp decline in private vehicle deliveries in the US compared to October last year, led by EVs. This was due to the end of the subsidy. Total deliveries fell by 6.5% in October compared to September, with deliveries of EVs falling by about 24%, from about 98,000 to only 74,000.

However, in the US, it is estimated that the decline would have been sharper if the ongoing government shutdown in the US had not disrupted the ability to analyze the full data. Analysts in the US estimate that this is only the beginning of a trend of decline in demand for EVs, which will accelerate in the coming months.

The decline comes after a "Rally" of EV purchases, which were intended to advance the abolition of the subsidy. In the first three quarters of 2025, about 1.2 million private EVs were sold in the US, an all-time record. Their market share also jumped to a record level of 12% of all deliveries in the market.

Now, the US is closely following the trend of development and launch of new vehicles by domestic automakers. According to estimates, if manufacturers subsidize part of the government benefit that has ended, sales in the segment may stabilize. However, if they decide to reduce their exposure to the segment, the decline will be very sharp.

South Korea

South Korea will increase EV subsidies by 20% in 2026

Next year, the South Korean government is expected to significantly increase government incentives for EVs. This is part of its transportation master plan, known as K-mobility, which aims to prepare the market, the automotive industry, and suppliers for the era of artificial intelligence and smart vehicles.

The Korean government has been subsidizing the purchase of electric and Hydrogen drive vehicles since the middle of the last decade. However, unlike many countries, which are currently reducing incentives for such vehicles, it is setting clear goals for increasing their market penetration with the help of government incentives.

In November, the government announced that starting in 2026, the subsidy budget would increase from 780 billion won (about 461 million euros) to 936 billion won (about 555 million euros), an increase of about 20%.

A significant portion of the new funding package will be allocated to a scrappage program, under which buyers of new EVs will receive a grant of hundreds of dollars if they scrap their old internal combustion vehicles. The package will also include dedicated incentive programs for buses powered by electricity or hydrogen.

By 2030, the South Korean government intends to convert about 70 percent of the country’s internal combustion engine component suppliers into suppliers of parts for “Futuristic” vehicles. The government has already identified about 200 such suppliers, who will benefit from government research programs for green transformation.

The government also plans to train around 70,000 experts in the field of future mobility and transportation by 2033, with the training program including areas such as artificial intelligence and robotics. In addition, an amount of around 8.85 billion euros will be allocated for government subsidies for the automotive industry.

The South Korean government also intends to close the gap with the world's leading countries in terms of autonomous driving based on artificial intelligence. This is done in cooperation with local technology giants, which will develop dedicated platforms for software-defined vehicles (SDV) and artificial intelligence. Preparation of the necessary legal framework for this is expected to be completed by 2026.

China

The Chinese Ministry of Industry and Information Technology published binding international standards for the safety of “Smart” and connected vehicles

The Chinese government continues to aggressively regulate the country’s “Smart” vehicle market in an effort to keep pace with the rapid technological development in the field. In November, China’s Ministry of Industry and Information Technology published two proposals for formulating mandatory national standards in this area: “Safety Requirements for Automated Driving Systems of Smart and Connected Vehicles” and “Safety Requirements for Integrated Driver Assistance Systems (ADAS) of Smart and Connected Vehicles.” The proposals were posted online for public comment.

The future standards are intended to oversee the design, development, and testing of autonomous driving systems for smart and connected vehicles, ensure their reliable operation in complex traffic scenarios, and minimize traffic accidents caused by system failures or software judgment errors.

The first standard, "Safety Requirements for Automated Driving Systems of Smart and Connected Vehicles," will be formulated within 16 months and will apply to Class M (passenger) and Class N (truck) vehicles equipped with autonomous driving systems. It will define the technical requirements, manufacturer requirements, and testing and evaluation methods for autonomous driving systems, including requirements for performing dynamic driving tasks, human-machine interaction, safety management capabilities, safety records, testing, audit, and evaluation methods.

The second standard, “Safety Requirements for Integrated Driver Assistance Systems for Intelligent and Connected Vehicles” (Level 2 Advanced Driver Assistance Systems or ADAS), defines a development phase of up to 22 months. It upgrades the requirements for driver condition monitoring to ensure that drivers maintain the required level of attention when using driver assistance systems. It also mandates field testing of the systems’ detection and response capabilities in typical construction zones and against common obstacles such as cones, water barriers, and crash barriers.

Middle East

Saudi Arabia continues its efforts to develop an independent auto industry on the Red Sea coast

Saudi Arabia continues its efforts to break its dependence on oil and develop a local, independent automotive industry. After signing an agreement with Hyundai to establish a local manufacturing plant earlier this year, in November the Saudi Ministry of Investment, the Saudi National Center for Industrial Development, and a Saudi corporation, which deals with automotive products and related services, signed a memorandum of understanding with Stellantis to explore the possibility of establishing a plant to manufacture commercial and passenger vehicles in Saudi Arabia.

In a joint statement, the parties involved said they would examine the feasibility of production as part of the Saudi government's "Vision 2030" plan. This plan, launched in 2016, is designed to reduce the kingdom's economic dependence on oil, encourage private sector investment and growth, and modernize economic and social infrastructure.

The parties involved said that "The project is intended to increase the rate of local production in the Saudi automotive industry and contribute to its development and sustainability." The agreement was signed during an investment forum in Washington, which also included a visit by Saudi Crown Prince Mohammed bin Salman to the White House. During the visit, officials said that Saudi Arabia and the US would begin joint investment projects worth billions of dollars.

Currently, American car brands are popular among Saudi consumers, but Chinese car brands are increasingly capturing sales in Saudi Arabia's EV market. Saudi Arabia plans to establish a car production center on the Red Sea coast with the help of companies such as Lucid, Hyundai, and tire manufacturer Pirelli, with the ultimate goal of exporting the vehicles throughout the Middle East. The project is expected to contribute about $25 billion to Saudi Arabia's gross domestic product by 2035, and support the country's plan to diversify its sources of income.

India

The Indian government adopts a new tax policy to encourage manufacturing, export, and domestic consumption of vehicles

India is determined to become one of the most important global centers for automobile production and export in the coming years, and one of the important steps on the way to this goal is the tax reform known as GST 2.0, which officially came into effect in September and is currently being implemented at an accelerated pace. The reform is designed to fundamentally change India's historical and complicated taxation system on products and services, including automobiles, to lower taxes and simplify them in favor of reducing costs for the consumer.

The reform includes several steps, which have already begun to have a positive impact on demand in the Indian automobile market.

These are the main elements in the new tax reform:

•  Significant reduction in the tax on two-wheeled vehicles with an engine capacity of up to 350 cc, from the current level of about 28% to a flat tax of 18%. As a result, demand for such vehicles has already jumped by hundreds of percent.

•  Imposition of a fixed tax of 40% on luxury cars, SUVs, and large motorcycles. Previously, the tax was 28%, but in practice, additions of up to 22% were added to it in the past, which significantly increased the effective tax. The current system adds more transparency.

•  A flat tax of 18% on commercial vehicles, including trucks, buses, and ambulances, instead of 28% so far.

•  The tax on EVs, of all types, has not changed and will continue to stand at 5%.

• The tax on spare parts for all types of vehicles has been reduced to 18%.

During November, estimates were published in India that the new taxation system would lead to an increase in sales of at least 5% in the coming months, due to the resulting price reductions. International corporations, car marketers, and/or car parts manufacturers in India also welcomed the move. In addition, the global media reported that India is rapidly becoming an important manufacturing and export center for global car manufacturers, with an emphasis on exports to Europe. This is due to increasing investments in local factories and the search for alternatives to China as a low-cost manufacturing country.

This is a significant development for Indian car manufacturing plants, which have so far supplied vehicles mainly to South America, Africa, and the Middle East. Suzuki reportedly plans to invest around $7.7 billion by 2031 to increase its production capacity in India from 2.5 million to 4 million units per year. Specifically, the company wants to make India a major manufacturing hub for EVs and has already shipped more than 7,400 EVs to European markets since August this year.

Honda is also ramping up its operations in India, and recently announced that India will serve as a manufacturing hub for one of its future EVs, which will be exported to Japan and other Asian countries.

Between April and October, India exported 514,622 vehicles worldwide. South Africa was the largest export destination, with 17% of total exports, worth $1.24 billion. It was followed by Saudi Arabia with 16.5% of exports, Mexico (13%), Japan (11%), and the Emirates (7%). India also exported auto parts worth $22.9 billion in the last fiscal year, with 29 percent of exports going to Europe.

Israel

The tax authority presented an outline for updating the purchasing tax on EVs, “Green” car’s value of use benefits, and the luxury car tax

 During November, the Tax Authority presented the proposed outline of vehicle taxation for 2026 and beyond in three areas: purchase tax on EVs, the benefits for the value of use of a “Green” vehicle, and the luxury tax.

According to the outline, the purchase tax rate on EVs will be 52% in 2026, up to a benefit ceiling of NIS 30,000, compared to 45% up to a benefit ceiling of NIS 35,000 in 2025.

Despite the increase in the purchase tax, the Authority continues to refer to the increased tax rate as a “Benefit” (compared to the alternative of a full 83% purchase tax) and proposes, as it did this year, that in order to subsidize the tax reduction on EVs, tax reductions for the green score of non-electric vehicles will be reduced by a fixed amount of NIS 750.

Although the Tax Authority originally planned a comprehensive reform of the monthly usage value benefits for owners of attached vehicles, centered on a significant reduction in the benefit for plug-in vehicles and an increase in the benefit for EVs, the current outline was ultimately left unchanged, with the only updates including an adjustment to the index.

In 2025, the benefit was 560 NIS for a hybrid vehicle, 1,130 NIS for a plug-in vehicle, and 1,350 NIS for an EV.

In addition, it is proposed to extend the validity of these amounts until the end of 2028, although it is possible that the issue will ultimately be re-examined throughout the period, depending on the extent of penetration of the various types of vehicles into the market.

The Ministry of Finance estimates that the cost of the measure to the state treasury is estimated at approximately 260 million NIS per year. The order states that "A balancing act must be found as a condition for extending the validity of the amounts."

Finally, the orders propose that the temporary luxury tax, which currently applies to vehicles with a consumer price of more than 300 thousand NIS, which will expire on January 1, 2026, will become a permanent tax.

It should be noted that during December, the Finance Committee is scheduled to discuss the outline, so that changes may be made to it.