Executive Summary: ISG Provider Lens™ Automotive and Mobility Services and Solutions - North America 2025
02 Jul 2025
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New age technologies, changing consumer behavior and sustainability are reshaping the auto industry
The North American automotive industry is undergoing a significant transformation driven by technological advancements, evolving consumer preferences, tariffs, regulatory pressures and new business models. The industry stands at a crossroads of unprecedented change driven by the convergence of technological advancements, regulatory pressures and evolving consumer behaviors. The transition toward eMobility, the rise of software-defined vehicles (SDVs) and the importance of connectivity and sustainability are shaping the industry’s future. However, automotive manufacturers must navigate various challenges, including technology integration complexities, cybersecurity threats
and compliance with stringent regulations to remain competitive in this evolving landscape.
To thrive in this environment, stakeholders must foster innovation through strategic collaborations, invest in advanced technologies and remain attuned to shifting consumer expectations. By proactively addressing these trends, drivers and challenges, the automotive industry can pave the way for a sustainable and connected future that benefits manufacturers, consumer and society.
Key trends and drivers shaping the global automotive landscape include:
Continued emphasis on CASE technologies: The automotive industry is focused on the development of CASE technologies — connected, autonomous, shared and electrified mobility solutions. Although the adoption of these innovations is not progressing as quickly as anticipated, they remain integral to the industry’s future. As automakers invest heavily in R&D, the potential for revenue generation through these technologies represents a significant opportunity despite the slower-than-expected uptake. Waymo has pioneered autonomous driving technologies,
partnering with various stakeholders to develop autonomous ride-hailing services.
Tariffs reshaping the industry in the near term: The reintroduction of 25 percent tariffs on imported vehicles and parts in April 2025 is expected to have a near-term effect on the North American industry. Automakers such as GM, Ford, and Stellantis face projected losses of up to $108 billion due to increased production costs. Foreign automakers, such as Audi, are considering establishing U.S. manufacturing facilities to circumvent tariffs.
Ecosystem shift toward eMobility and mobility services: The automotive industry is witnessing a paradigm shift toward electric mobility (eMobility) and mobility services. Consumers are increasingly inclined toward sustainable
transportation options, resulting in a surge in electric vehicle (EV) adoption and alternative mobility services such as ride-sharing and vehicle subscriptions. The transition to eMobility is reshaping traditional car ownership models, prompting the creation of mobility-asa-service (MaaS) platforms that offer seamless and flexible mobility solutions. They allow users to select shared transportation, reducing the number of vehicles on the road.
Rise of SDVs: The shift toward SDVs is one of the most transformative trends in the automotive industry. With the integration of advanced computing platforms, vehicles are becoming more software-centric, allowing continuous upgrades, personalized features and enhanced connectivity. This transformation enables car manufacturers to reimagine their business models, focusing on subscription-based services and over-the-air (OTA) software updates that enhance user experiences post-purchase. For example, Tesla leads in using software updates to improve vehicle performance and add features such as enhanced autopilot functionalities and OTA upgrades.
Emergence of ecosystem collaborations: The complexity of the modern automotive landscape has necessitated collaborations among various ecosystem stakeholders. Partnerships between OEMs, technology firms, charging infrastructure providers and mobility service companies are becoming common. These collaborations aim to streamline
operations, enhance service offerings and address consumers’ evolving needs.
For example, to mitigate tariff risks, Mitsubishi and Nissan are considering a joint US production plant. OEMs are increasingly aligning with tech companies to leverage their expertise in data analytics, AI and connectivity.
Growth of robo taxi services: The proliferation of robo taxis signifies a major shift in transportation. As this technology matures, robo taxi services are expected to become more affordable and widely available. This trend threatens traditional vehicle ownership models and compels automotive companies to integrate self-driving technologies into their product lines. The rise of autonomous vehicles will alter consumer behavior and reshape urban
mobility frameworks, leading to changes in infrastructure and regulatory requirements. However, OEMs and operators such as Tesla and Waymo face regulatory scrutiny in response to their robotaxi services, especially around safety, as prescribed by the National Highway Traffic Safety Administration (NHTSA).
Sustainability in the mix: Sustainability is a common thread across all initiatives as businesses aim to reduce carbon footprints through innovative practices such as closedloop battery manufacturing and secondlife battery repurposing. By embracing comprehensive strategies encompassing technology, collaboration and sustainability,
organizations are well positioned to lead the EV revolution and transition to a future with connected and sustainable mobility. Awareness of environmental issues has led to increased demand for eco-friendly vehicles, compelling
manufacturers to focus on EVs and sustainable production practices. The expectation for seamless connectivity in vehicles is driving the integration of advanced technologies, allowing drivers to access services such as navigation,
entertainment and maintenance updates.
Advancements in battery technology: Innovations in battery technology are at the forefront of the automotive industry’s transition to electric mobility. Enhanced battery performance, reduced costs and improved charging infrastructure are critical to driving EV adoption. As manufacturers invest in R&D to create more efficient energy storage solutions, consumers are increasingly attracted to EVs because of their longer ranges and reduced charging times. However, the rollback of federal EV tax credits and mandates has dampened consumer incentives, which is forcing manufacturers to recalibrate production plans in response to these challenges.
Regulatory pressure and compliance: The automotive industry faces mounting regulatory pressure aimed at reducing emissions and enhancing safety standards. Thus, automakers are advocating for regulatory updates. The
evolving regulatory environment compels North American automakers to invest in new technologies, reengineer their production processes and ensure compliance with industry standards, thereby accelerating the pace of innovation. Compliance with evolving regulations presents a formidable challenge for automotive manufacturers. The transition toward EVs and sustainable practices necessitates substantial investments in research, workforce training and process
adjustments to meet regulatory standards. Stringent emissions regulations, —such as those set by the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), —compel automakers to
invest in EV technology to comply with lower emissions targets. CARB’s Advanced Clean Cars II rule, for instance, mandates that all new cars and light trucks sold in California by 2035 must be zero-emission vehicles, with limited
allowances for plug-in hybrids.
Complexities in technology integration: As the automotive industry adopts a range of new technologies, the coexistence of legacy systems and new platforms creates integration challenges. Automakers must navigate the complexities of software and hardware compatibility, operational efficiency and high operational costs. The need to reduce technical debt while managing multiple generations of technology poses risks that necessitate careful planning and execution.
Cybersecurity threats: With the rise of connected vehicles comes increased vulnerability to cyberthreats. The automotive industry faces significant challenges in ensuring the safety and security of vehicles and their data. Cybersecurity must be a priority throughout the vehicle lifecycle, necessitating robust governance practices, continuous monitoring and proactive risk management to fend off potential attacks.
Changing demographics and consumer preferences: The automotive market is experiencing demographic shifts, with younger consumers showing distinct preferences compared with previous generations. This shift includes a move
away from traditional car ownership models. With rising urbanization, consumers prioritize access over ownership, prompting automakers to adapt their product offerings and services to cater to these evolving preferences. North
American consumers increasingly prefer larger vehicles, such as SUVs and trucks, driven by demand for versatility, comfort, and perceived safety. This trend persists despite fluctuating fuel prices and influences automaker product
lineups and pricing strategies.
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