Major Automotive Global Trends - March 2025

Global

The escalation of the global trade war and its impact on the auto industry

March 2025 will be remembered as the month when the trade war became a swiftly escalating global phenomenon, threatening the entire automotive industry. Precursors have appeared in the last two years with the imposition of tariffs on EVs imported from China to Europe, imposition of tariffs on car imports and battery imports from China to the US, and limited reciprocal measures taken by China.

However, with the Trump administration taking office, the "war" intensified and was reflected in the imposition of high tariffs on imports of vehicles and their parts from Canada and Mexico (and later from all over the world), the imposition of tariffs on imports of essential raw materials such as steel and aluminum, and more. As of the end of March, various governments around the world were considering imposing reciprocal tariffs on American products. In light of this, car manufacturers in the US and abroad are considering emergency plans.

Below is a summary of the key events on this front during March:

• In early March, the 25% tariffs on all imports from Canada and Mexico, which the Trump administration announced a month earlier, came into effect in the US. The day after the tariffs were announced, President Trump announced that he was granting US auto and parts manufacturers an exemption from these tariffs until April. The move was announced after a conversation between the president and the presidents of major automakers. The purpose of the temporary exemption is to ensure that US automakers do not suffer financially and to give them time to bring production back to the US.

The White House statement said that at the request of companies affiliated with the Association of Auto and Parts Manufacturers, the President agreed to give them a one-month tariff exemption and conveyed a message to the companies that they should begin working to transfer production to the US.

The American auto industry responded by claiming that a month's extension was meaningless given the scale and complexity of the investments required for the change. Most American automakers have manufacturing plants in Mexico and Canada, and import vehicles and components from them to the US duty-free. Industry sources noted in response that the entire move would provide a "gift" to Korean and Japanese automakers, who import millions of finished vehicles from abroad to the US and therefore would not have to pay the tariffs imposed on imports from Canada and Mexico.

VW, for example, has already announced that it has activated an emergency plan and is working to adapt its production in Mexico to the new government plan. VW has a large plant in Puebla, Mexico, where it also produces models intended for the US market. The aim of the emergency plan is to preserve as many jobs as possible while protecting the company's businesses, supply chains, retailers, and consumers.

The German company called on the US president to repeal the tariffs, as they also affect American jobs, economic growth, and families across the country. According to the company, the tariffs will have a devastating impact on the auto industry and will harm dealers and customers in the US.

A few days after the tariffs were imposed, the research division of Andersen Consulting published a report estimating that the imposition of tariffs on imports from Canada and Mexico could increase the average price of a new vehicle by up to $12,200 per vehicle. According to the report, "These are costs that cannot be hidden from the public and will be passed on to consumers... This is a significant disruptive event in the automotive industry". Andersen estimates that the tariffs, once they go into effect, could lead to an increase in the price of compact cars sold in the US of about $6,200, pickup trucks of about $8,000, full-size SUVs of about $9,000, and vehicles with electric and plug-in drives of about $12,200 or more. It should be noted that when the report was written, the effects of the imposition of tariffs on all imports of cars and parts to the US from around the world, which were announced at the end of March, were not taken into account (see more below on this issue).

• On March 10th, Chinese “Counter-tariffs” on American goods took effect as a response to the American administration's imposition of an additional 10% tariff on Chinese imports to the US. The new Chinese tariffs, also at 10%, are specifically targeted at agricultural products imported from the US. However, a month earlier, China had already imposed additional tariffs of 10% on vehicles with an engine capacity of 2.5 liters and above, imported from the US. The US tariffs on Chinese imports, which already total 25%, led to an increase in the price of large American SUVs imported to China during March and/or a reduction in trade discounts on them. This is even though car manufacturers have absorbed some of the price increase.

• On March 12, the Trump administration imposed a 25% tariff on all raw materials and steel and aluminum products imported into the US. The move was intended to protect US steel and aluminum producers and reshape global trade rules in favor of the U.S. At the same time, the administration extended the tariffs to hundreds of imported finished products, which include steel and aluminum components, such as nuts, bolts, bulldozer blades, cans, and more. The move was met with strong opposition from the American auto industry, which currently imports a significant portion of its raw aluminum and finished automotive components from cheap sources around the world.

On the same day that the US administration announced tariffs on aluminum and steel imports, the European Commission responded by announcing a "Contingency plan", prepared in advance, to impose countervailing duties on US goods worth approximately $28 billion, starting in early April. This is in order to protect businesses, workers, and consumers in Europe against the consequences of unjustified US trade measures.

The measures include an increase in tariffs on aluminum, steel and their products imported from the US from the current 10% to 25%; an expansion of the scope of products on which tariffs are imposed to products containing aluminum and steel (such as window frames), household products (such as cookware, machinery, furniture, vehicles and more); and imposing tariffs on agricultural products (including poultry, eggs, dairy products, sugar, vegetables, etc.). The EU estimates that the American tariffs will affect exports from Europe to a total of approximately 26 billion euros, and as a result, importers in the US will pay approximately 6 billion euros more in annual tariffs.

• On March 13, Canada announced that, following the imposition of tariffs on aluminum and steel imports and as part of its policy to impose reciprocal tariffs on the US, on a "Dollar-for-dollar" basis, it is imposing parallel tariffs on imports from the US of steel, aluminum and products made from them, totaling $14.2 billion. This is in addition to the overall tariffs of approximately $30 billion that were already imposed in early March on imports from the US of many other products.

The tariffs are imposed on computers, monitors, sports equipment, metal castings, and more. Canadian Energy Minister Jonathan Wilkinson even threatened that if the US continues to impose tariffs on imported steel and aluminum, Canada could take non-tariff sanctions against it, such as restricting Canadian crude oil exports to the US or imposing tariffs on mineral exports to the US.

Canada currently exports about 4 million barrels of crude oil to the US every day, mainly to refineries in the Midwest of the US. The Canadian Energy Minister added that Canada could also impose tariffs on American ethanol. Canada is the largest supplier of aluminum and steel to the US.

• On March 14, American media reported that major American automakers had begun stockpiling large quantities of parts manufactured in neighboring countries in preparation for the tariff hike in April. It was also reported that the company was "Re-examining its logistics supply routes and cross-border transportation to maximize efficiency". The company urged its suppliers to continue formulating innovative ideas to improve supply chain resilience in the medium-to-long term.

• On March 17, the mayor of Toronto, one of Canada's largest cities, announced that Tesla vehicles would no longer be eligible for local subsidies and incentives granted in Toronto to electric taxis and ride-hailing vehicles. This was in response to the tariffs imposed by the US government on Canada and the involvement of Tesla Chairman Elon Musk in the government's decisions.

The spokesperson for the City of Toronto said: "We have made it clear that if consumers still want to purchase TESLA vehicles, it is their personal decision alone, but they should not expect subsidies from Canadian taxpayers". According to the statement, this is a symbolic decision whose economic significance is quite negligible.

• On March 27, the White House announced its intention to impose a 25% tariff on all vehicles and auto parts imported into the US, starting in early April 2025. The announcement shook the entire global auto industry, especially in Europe, South Korea, and Japan, which export vehicles and parts to the US worth approximately $240 billion annually. US analysts note that the blow to global auto exporters and their dealers in the US will be particularly large due to the "Immediate" nature of the move. This means that there will be no time to accumulate inventory in the US, and the tariff will be imposed even on vehicles that have already been ordered and manufactured and are making their way to the US. Analysts estimate that the blow will also be felt by American automakers, who import parts from all over the world and import finished vehicles from Mexico, Canada, and South Korea. Furthermore, according to estimates in the US, manufacturers will not be able to "Absorb" such a sharp tariff increase, and it will be reflected in a direct price increase and/or a cut in commissions for dealers. There are thousands of dealers in the US who market vehicles made in Japan, Korea, and Europe, and they are expected to suffer damage.

• On March 27, the South Korean government convened an emergency meeting with senior officials from Korean automakers, led by Hyundai, to examine options for dealing with the situation. The volume of automobile exports from South Korea to the US, excluding vehicles manufactured in the US itself, stood at approximately $34.7 billion last year and is considered a critical source of profitability and employment for Korean manufacturers. According to the Korean Minister of Commerce, Korea's automotive industry, including automakers and parts suppliers, is set to encounter "Substantial difficulties" due to the imposition of tariffs. However, he said the Korean government is considering providing an emergency aid package to Korean automakers to stabilize their situation in light of their expected decline in exports. He added that South Korea is not the only country on the front lines of the new trade war. At the same time, talks are underway with the Americans with the aim of softening the decision. The entire South Korean stock market fell following the announcements, with an emphasis on shares of automakers.

• On March 27, Germany's Minister of Economics and the Automotive Industry said that President Trump's decision to impose a 25% tariff on all vehicles imported into the US was a severe blow to free global trade based on bilateral rules. The minister called on the EU to take a firm response to the American decision, saying that "Ultimately it will harm the United States, the EU and global trade as a whole... It must be made clear that we will not back down in the face of the American threat. A show of strength and self-confidence is needed".

• On March 27, European Commission President Ursula Gertrud von der Leyen announced that "We will assess the implications of the American step and of additional steps planned by the American administration in the coming days... The EU will defend its economic interests while striving for negotiated solutions". The French Finance Minister, however, was more determined, saying that "The only solution facing the EU is to raise tariffs on American products in response... The US has completely changed its economic policy in a very aggressive manner".

• On March 27, the Japanese Cabinet Secretary called on the US to grant the Japanese auto industry an exemption from tariffs. He said, “The American moves will have a significant impact on bilateral economic relations, the global economy, and the international trading system”. The Japanese Prime Minister said that Japan would prepare an “Appropriate response” and that “All options are on the table.” He also emphasized the great contribution of Japanese automakers to employment and the American economy, noting that Japanese automakers have direct investments in the US of more than $61 billion and create 2.3 million jobs.

• At the end of March, Thailand's Finance Minister announced that the Trump administration's new tariff policy would have a significant impact on the export of Thai-made auto parts. According to him, the tariffs would reduce the volume of auto parts exports from Thailand to the US and other countries where vehicles are manufactured. Thailand is currently the largest auto parts manufacturing center in Southeast Asia and exports to, among others, Honda and Toyota. According to him, the Thai government hopes to negotiate with the US so that it can export parts directly to the US duty-free, rather than indirectly to imported vehicles, which are subject to tariffs.

Europe

Pressured by the auto industry, the EU Commission shows signs of withdrawal from the strict environmental targets for autos and presents a new transportation and environmental plan

In recent months, there have been quite a few indications that the EU Commission may withdraw from the tough environmental automotive policy that it has established over the past three years and become more flexible towards the European automotive industry.

Initially, there were loud protests from industry executives and representatives of various EU governments, but recently, powerful political lobby groups have also entered the arena. In February of this year, the EU Commission announced that it was entering into a dialogue with the automotive industry on the future of the European automotive industry. In March, the results of that dialogue were published, heralding a significant policy change. Below are the main points of the draft of the new transport/environmental plan, which the EU Commission presented in March:

• Postponement of fines for car manufacturers that exceed the emission threshold: The main innovation in the draft is the Commission's agreement to postpone the original plan according to which car manufacturers should reduce the average emissions of their models to a very low level as early as this year (2025) - or face heavy fines. According to the Commission, "In order to prevent the industry from falling behind China and the US, it was decided to leave the average CO2 emission reduction target unchanged, but manufacturers who cannot meet the target in one year will be able to offset it by making an additional reduction in another year, until 2027."

According to the text announcement, "The Commission will soon present further flexibility in the regulations through a targeted amendment of the CO2 emission targets for cars and vans. The amendment, if approved, will allow car manufacturers to compensate for exceeding the target in one or two years by over-achieving in the following years". The proposal still needs to be approved by the European Parliament and the European Council.

• Accelerating the review of the decision to ban gasoline vehicles from 2035. So far, the proposal made by the automotive industry and lobby groups to de facto cancel the decision taken in 2023 to ban the marketing of ICE vehicles in the EU from 2035 has not been accepted. However, the Commission promises to "Accelerate the review process of this regulation." According to the draft communication, "The climate neutrality target for cars for 2035 allows early planning for investors and manufacturers... The European Commission will accelerate the expected review of the regulation". The EU Transport Commissioner also indicated that he would like to review the applicability of the decision on the 2035 target as early as this fall.

• Examine various measures to encourage EV penetration. According to the draft, lawmakers in Brussels will continue to formulate ways to expand the penetration of EVs in EU member states. One proposal is to adopt a system called "Social leasing" for new and used EVs. France has already implemented such a system, offering subsidized leasing rates to those in need to purchase or lease an EV. According to the EU Commission, "There is a need to exchange ideas between companies and learn from existing working methods on how to offer incentives to consumers according to the maturity of each market".

Another way to expand the penetration of EVs, which is being examined in Brussels, is to focus on European vehicle fleets, which, according to Commission data, account for about 60% of all annual vehicle deliveries in the EU. Therefore, Brussels will work to "Formulate a legislative proposal to reduce the carbon emissions of corporate vehicle fleets and establish measures to support the adoption of zero-emission vehicles by corporate customer". This will be done, among other things, by ending tax benefits for company vehicles with gasoline and diesel engines.

• Massive investments in charging infrastructure. The new European Commission plan includes support for the establishment of charging infrastructure along highways in the EU with an investment of approximately €570 million in 2025 and 2026 as part of the Alternative Fuels Infrastructure Program (AFIF), with a focus on heavy-duty vehicles. The draft also states that “Delays in network connections constitute a significant bottleneck”. To solve the problem, the Commission intends to issue guidelines and recommendations to member states soon to shorten the waiting time for charging point connections to the networks and give them priority, relying on working methods that have been successfully implemented in member states. In the same context, the Commission aims to establish a “Clean transport corridor” networked with charging stations across the EU to accelerate the deployment of charging stations for heavy-duty vehicles, along central logistics corridors as critical infrastructure. The draft also calls on member states to establish the regulatory framework needed for "Smart and bidirectional charging".

• Support for battery production in the EU. The draft includes a proposal to provide a “Battery acceleration package", which aims to support battery production in the EU, for example, by subsidizing the production of batteries within the EU and on the condition that the manufacturing company is European or is a partner of a European company. One of the proposals is to set a condition that the batteries contain a minimum of critical raw materials, which are produced within Europe, as a condition for the subsidy. This is a kind of European version of the Biden administration's legislation regarding the content of critical materials in batteries in the US.

• Expanding recycling. Another emphasis is on battery and vehicle recycling. The Commission states that it will examine providing dedicated funding for vehicle recycling and establishing battery recycling facilities in order to reduce the EU’s dependence on external suppliers of raw materials, mainly China.

• Autonomous driving technology. Another critical chapter in the draft concerns the EU's need to close the gap with China and the US in the field of autonomous driving through regulation. In practical terms, the European Commission aims to establish "At least one cross-border autonomous vehicle trial" and to establish "Autonomous driving corridors" in the EU on which autonomous vehicles can travel. The trial and feasibility study will focus on public autonomous vehicles for transporting passengers and commercial vehicles.

The Commission aims to focus on harmonizing autonomous vehicle regulation across the EU and therefore intends to draft rules that will better support the early deployment of vehicles with highly autonomous driving kits and advanced driver assistance systems on public roads. In the long term, the aim is to propose approval procedures as early as 2026 to facilitate the testing of advanced autonomous systems on public roads across the EU.

• Establishing a European platform for smart and connected vehicles. To stimulate the development of the next generation of vehicles, the Commission will launch the “European Autonomous and Connected Vehicles Organization”. The organization aims to develop an open and uniform platform across the EU for “Software-defined” vehicles alongside an in-vehicle computing architecture and “Innovative AI solutions for the automotive industry”. To test the new technologies, the new organization will establish a pilot lab as early as 2026/2027 to serve as a collaborative environment for the industry for software-defined vehicles and AI engineering and as a testbed for innovation at the application layer. The funding for these projects will come from joint public and private investment under relevant partnerships. The Commission states that it aims to raise around €1 billion to finance the new organization’s planned activities from 2025 to 2027.
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British Government reduces EV owners' benefits

In recent years, the UK has been considered a leader in policies to encourage the purchase of EVs, but it has also recently encountered budgetary constraints, and its new government has been forced to reduce benefits. Starting from April 1, 2025, EV owners in the UK will face a significant tax change, including a sharp increase in fees.

The plan to abolish the exemption from fees has been known since 2022, but many have doubted whether it will be implemented. Now, anyone purchasing an EV that costs £40,000 or more will no longer be exempt from paying an annual fee (VED) as was the case in the past. As a result, a significant portion of buyers of EVs in the country will have to pay an additional £425 per year over the next five years.

The change will affect not only these new buyers but also existing EV owners who purchased their car between April 2017 and the end of March 2025. They will now be required to pay £195 per year. Meanwhile, plug-in vehicle owners, who have also benefited from the exemption to date, will now pay £110 per year. Electric vans will also no longer benefit from the exemption and will now pay a rate equivalent to that of petrol and diesel vans, which is around £290 per year. In the UK, it is estimated that the tax changes will bring the UK treasury over £500 million annually and will partially offset the decline in fuel tax revenue. It should be noted that in February, strong growth was recorded in sales in the EV segment in the UK, even though sales in the market as a whole have fallen for five consecutive months.

Meanwhile, it appears that the UK labor government is also beginning to backtrack on the previous government's policy of expanding the penetration of EVs. This is under pressure from the local car industry. Nissan, one of the largest employers in the UK, recently warned that British regulations, which dictate an accelerated transition for customers to EVs, are endangering its manufacturing plant in Sunderland.

The British press claims that in response to the appeal, Britain's finance minister announced that a "Fundamental change in policy" had been agreed, to "Ensure that Nissan's long-term future in the country is secured... We will ensure that the business and regulatory environment reflects this". He added that "The whole government agrees that the emissions target we want to achieve cannot be achieved by losing British jobs and harming British industry".

According to British media, this is an indication that the Labor government is considering relaxing the original targets and timetable for the transition to EVs. According to the current plan, car manufacturers selling vehicles in the UK are required to achieve a sales mix that includes 28% EVs this year, and those who fail to meet this target face heavy fines.

The Labor government aims to consult with the British car industry on ways to achieve the goal of gradually reducing sales of new petrol and diesel cars in the UK until their marketing is stopped in 2030. The British Department for Transport has officially announced that such a consultation would provide much-needed clarity to the industry, build the confidence of consumers considering making the switch to EVs, and stimulate the charging infrastructure sector, which has already invested billions of pounds in charging networks.

Paris residents voted to remove private vehicles from the city’s streets

Paris is one of the most congested cities in Europe, and residents of the French capital seem to be fed up with traffic jams. In March, the results of a public survey conducted among city residents were published, showing that most support a significant expansion of the city's car-free zone, from about 200 streets today to more than 7,000 in the near future. 66% of respondents supported the proposal.

The survey is expected to boost the left-wing party that currently controls the city council and is trying to make Paris a "Car-free city." The city council has already decided to impose increased parking fees on SUVs and heavy vehicles. Among the measures currently being discussed by the city council is a proposal to eliminate ten thousand existing parking spaces in addition to a similar number of parking spaces that have been eliminated since the beginning of the decade.

USA

The EPA “Softens” strict emission and consumption targets set by the Biden administration

In early March, the US Environmental Protection Agency (EPA) announced its intention to reverse the Biden administration’s policy and significantly ease the government’s goals for reducing greenhouse gas emissions from private and commercial vehicles and power plants in the US. However, the agency, led by a new administrator recently appointed by Trump, has not yet provided specific data on the new goals.

According to the agency's announcement, it will reconsider the emission reduction regulations set for the 2027 model year for light, medium, and heavy-duty vehicles. It said, "In addition to imposing regulatory costs of more than $700 billion, the targets set by the Biden-Harris administration provided the basis for creating an EV monopoly and prevented Americans from choosing a safe and affordable car for their families. This, in addition to raising the cost of living for all products, which are transported by trucks".

The announcement marks a significant shift in environmental policy: "The US auto industry has been hurt by the last administration's overwhelming regulatory regime. As we reconsider nearly a trillion dollars in regulatory costs, we will use the rule of law to protect consumer choice and the environment".

Under the Biden administration, the EPA adopted significantly lower emissions targets than are currently in place for new cars and vans weighing up to 3.8 tons, starting with the 2027 model year (which begins in the US in January 2026) and through 2032. Under the outgoing administration's targets, which took effect in 2024, emissions are supposed to be reduced by 49% by 2032 compared to 2026 levels.

Specifically, the requirements stated that automakers would have to stay below an average of 170 grams of CO2 per mile across their entire model range starting in the 2027 model year. The requirements were to gradually become stricter by 2032, culminating in an average of about 85 grams per mile. In addition to reducing CO2, the regulations also mandated a significant reduction in respirable particulate emissions.

Under the previous administration, the EPA said it did not dictate a specific type of propulsion and that car and truck manufacturers could decide how they wanted to achieve the relevant CO2 fleet limits, at least in theory. However, last spring, the agency estimated that the regulations would result in about 30% to 56% of all new car sales in the US being electric models between 2030 and 2032.

The Biden administration also adopted stricter emissions regulations for heavy-duty vehicles in April. Still, these were more complex and set different limits depending on the type of vehicle and its intended use. However, even these goals could only be achieved by significantly increasing, up to 30%, sales of zero-emission trucks.

The term heavy-duty vehicles in the US includes transportation and distribution trucks, garbage trucks, public transportation, school buses, tractors, etc.

South Africa

The South African automotive industry expands into the electric sector, aided by government support

EV penetration on the African continent has been minimal so far, but there, too, winds of change are now being felt, led by South Africa. On March 12, the South African Ministry of Finance announced it would invest about one billion rand ($54.27 million) in special funds to support local projects for producing EVs, batteries, and related areas.

South Africa is the largest auto manufacturing hub in sub-Saharan Africa and is home to Toyota, Ford, Isuzu, VW, and Mercedes-Benz plants. Auto industry insiders said the incentives and policy support introduced by the South African government would encourage automakers to increase their own investment in EV production facilities in the country, some of which are intended for export.

The EV Strategic Plan, published by the South African government in 2023, clearly stated that the government aims to achieve a strategic goal of converting the South African automotive industry from the production of ICE vehicles to the combined production of gasoline vehicles alongside EVs by 2035.

In the budget review, the South African Ministry of Finance said it would work with the Ministry of Minerals to develop the regional production of critical minerals, but a timetable for this has not yet been announced. South Africa is rich in critical minerals such as copper, cobalt, and lithium, which are important raw materials for the production of products such as EV batteries and solar panels, and play an important role in the transition to EVs.

In January this year, the South African president signed a law to reduce taxes on companies that produce EVs and related components. As a result, a number of Chinese car manufacturers are already considering investments in the South African automotive industry.

Israel

The order limiting the increase in the purchase tax on EVs to 45% by the end of 2025 has come into effect, and at the same time, a tax benefit is being provided for electric commercial vehicles.

In early March, Finance Minister Bezalel Smotrich signed the order regulating the purchase tax on EVs. This was preceded by lengthy discussions and postponements in the Finance Committee due to various demands raised by Knesset members. The order effectively confirms the Finance Ministry's decision from the end of 2024 regarding the purchase tax on EVs, but also includes a new temporary benefit for electric commercial vehicles, which will be in effect until the end of 2026.

According to the order, the purchase tax on private EVs will be 45% with a benefit ceiling of NIS 35,000 until December 31, 2025, and then the tax level will be decided later. The purchase tax on commercial vehicles of all weights will be 45% with a benefit ceiling of NIS 35,000 until May 12, 2025, and then will be reduced to 35% with a benefit ceiling of NIS 50,000 until December 31, 2026.

In addition, the order stipulates that from January 1, 2025, until December 31, 2028, the tax benefit granted to non-electric vehicles will be reduced according to their level of air pollution ("Green taxation" benefit), through a uniform shekel reduction in pollution levels 1 to 14 and a tax increase in level 15. The order also stipulates that in 2025 alone, an additional reduction of the green taxation benefit by NIS 750 will apply, meaning that the reduction in the purchase tax will decrease by NIS 750, while the tax increase will increase by NIS 750.

Contrary to expectations, the Ministry of Finance did not publish a multi-year outline for the purchase tax on EVs, which would allow for a long-term planning horizon for the industry. This means that in January 2026, the default will again be an increase in the purchase tax on EVs to 83% unless a lower tax rate is announced before that date. As a result, a massive wave of imports is expected again towards the end of the year in anticipation of the tax increase. According to estimates, the Ministry of Finance will wait until the 90th minute, among other things, to examine how the implementation of the mileage tax on EVs is progressing.

According to the original plan, the tax was supposed to go into effect in January 2026. However, the delay in preparing for it, along with political opposition, may delay it.