The Age of “Polycrisis” and Its Shockwave on the Global Auto Industry

The global automotive industry is currently navigating a period defined as a “polycrisis” – a state in which multiple crises overlap and amplify one another, pushing the sector into unprecedented uncertainty. From economic volatility, tightening environmental regulations, and fierce technological competition to rapidly changing consumer behavior, all forces are converging to create immense pressure on carmakers. Legacy players such as Ford, Toyota, Volkswagen, and General Motors, once seen as pillars of industrial resilience, are now grappling with soaring raw material costs, historically high interest rates, and weakening demand. At the same time, they are compelled to accelerate the shift toward electric vehicles (EVs) to align with the global green transition. The convergence of these unfavorable factors has generated a profound shock, forcing the automotive industry to confront the reality that outdated business models are no longer sustainable in this new era.

Mounting Pressure from the EV Boom and Intensifying Competition

One of the most pressing challenges comes from the explosive rise of EVs. What was once a niche market segment has now become the battleground that will determine the survival of automakers. According to CNBC, EVs accounted for over 20% of global car sales in 2024, while in China – the world’s largest auto market – the figure surpassed 40%. Tesla and BYD have emerged as dominant leaders, placing traditional manufacturers heavily reliant on internal combustion engines in a vulnerable position. To remain competitive, incumbents must pour massive investments into battery supply chains, EV production facilities, and advanced software ecosystems. Yet these investments squeeze short-term profitability, while younger rivals with leaner cost structures continue to expand their market share. For legacy carmakers, the only option is to radically accelerate transformation and rethink strategies, or risk being left behind in an unforgiving technological race.

Escalating Production Costs and Macroeconomic Pressures

Beyond competitive pressures, the industry also faces daunting macroeconomic headwinds. The prices of key raw materials such as lithium, nickel, and copper have surged, driving battery production costs to record highs. Elevated interest rates further increase borrowing expenses for both manufacturers and consumers. CNBC reports that in the U.S., the average auto loan rate in 2025 has surpassed 7%, the highest level in nearly two decades. This directly suppresses new vehicle demand as consumers hesitate to commit to such large financial outlays. In Europe, persistent inflation and the risk of mild recession are weighing on consumer confidence, while in emerging markets, high car prices push buyers toward used vehicles or shared mobility services. In short, the auto sector is being squeezed on both the supply and demand sides, creating a double-bind scenario for manufacturers.

Shifting Consumer Behavior in Times of Uncertainty

Consumers themselves are redefining their approach to mobility. The rising cost of new cars has prompted many to delay purchases, opting instead for used vehicles or long-term leasing arrangements. Shared mobility platforms and green transportation alternatives are gaining traction, especially in urban centers. Younger generations, particularly Gen Z, no longer view car ownership as a status symbol but rather as a functional mobility tool that must balance affordability and environmental sustainability. This shift is forcing automakers to expand beyond manufacturing and sales, venturing into service-driven models such as EV subscription packages, charging solutions, smart-driving software, and even car-sharing ecosystems.

The Road Ahead: Opportunities Coupled with Risks

Although the global auto industry faces daunting challenges, it still holds immense opportunities for those able to adapt swiftly. Governments in the U.S., EU, and China are rolling out strong policy support, including EV purchase subsidies, tax incentives, and large-scale investment in charging infrastructure. These measures provide important long-term growth drivers for EV adoption. However, such opportunities will only materialize for manufacturers willing to undergo deep restructuring, shifting focus from traditional mechanical production to integrated technology- and service-based business models. In the era of “polycrisis,” the automotive sector must embrace an uncomfortable truth: failing to change means being phased out. Those who act decisively, innovate strategically, and invest in sustainable solutions will find pathways to thrive even amid crisis, while those clinging to outdated practices will gradually be pushed out of the game.

(Source: CNBC)