2025 Auto Industry Report Card: EV Struggles, Tariff Hurdles, and the Path Forward for Investors

The year 2025 turned out to be a make-or-break moment for the automotive sector, marked by a dramatic slowdown in electric vehicle (EV) sales, shifting policy landscapes, and rising production costs. For retail investors and auto enthusiasts, the year offered a clear view of what's working—and what's not—in the rapidly evolving world of automotive retail and manufacturing.

The Auto Sector at a Crossroads

The EV boom that defined the previous decade has shown signs of slowing. In October 2025, compared to the previous year, with new EVs accounting for just 6% of total U.S. new vehicle sales. This decline was driven by a combination of factors: the expiration of tax credits, , and lingering consumer hesitancy around range and resale value.

At the same time, traditional automakers have taken a more cautious approach to all-electric transitions. related to its EV business, while General Motors plans to shift toward a 50% hybrid/EV mix by 2030. Meanwhile, the U.S. Department of Commerce is considering expanding to auto parts, which could further disrupt supply chains and pricing.

What the Numbers Say About the Industry

Despite these headwinds, the auto industry has shown resilience. Cox Automotive forecasts that U.S. new-vehicle sales . This is the best result since 2019, thanks in part to strong demand for used vehicles. Used car inventories have rebounded, and dealers are expressing optimism about improved margins and consumer confidence in 2026.

Dealership groups have also been busy reshaping their portfolios. Recent buy-sell deals have involved some of the largest names in the industry, with groups like ZT Automotive expanding into new markets and adding multiple locations across the U.S. Meanwhile, companies like CarMax are restructuring their operations to adapt to the changing landscape, including leadership changes and a focus on digital sales.

Technology and Innovation: AI and Infotainment

Even as EVs face headwinds, other areas of the industry are showing promise. The AI-enabled automotive features market , driven by in-vehicle companions, battery optimization, and sensor virtualization. Automakers are also investing heavily in infotainment systems, which are becoming a new revenue stream through paid features like navigation, vehicle diagnostics, and software updates according to insights from .

Meanwhile, the EV range extender market is gaining traction, . This suggests that hybrid and flexible energy solutions may continue to play a role in the transition away from internal combustion engines.

What This Means for Investors

For investors, the key takeaway is that the auto industry is at a turning point. While EVs remain a long-term growth area, the immediate risks include overvaluation, regulatory uncertainty, and shifting consumer preferences. Tesla faces a potential sales suspension in California over allegations of misleading marketing about its self-driving features. If its Q4 2025 results follow industry trends, the company could see a revenue drop .

That said, there are also opportunities in traditional automotive players. General Motors and Ford, while cutting back on EV investments, are still investing in hybrid and hydrogen technologies. European automakers like Volkswagen and BMW are also adapting to new that now allow up to 10% of new cars to use combustion engines after 2035.

The Road Ahead

Looking beyond 2025, the auto sector faces both challenges and opportunities. By 2026, are expected to return, creating a wave of consumer decisions around next vehicles. At the same time, Chinese automakers are making inroads in the European market with affordable EVs, signaling a shift in global market dynamics.

Investors should keep an eye on the regulatory landscape, particularly as the U.S. reviews the USMCA and as Mexico introduces new tariffs on imported goods. These policies could affect everything from parts sourcing to final vehicle pricing.

At the end of the day, the auto sector remains a key barometer for the broader economy. While EVs may not be the only path forward, innovation in AI, hybrid powertrains, and consumer-centric features is likely to shape the next chapter of the industry.