Five key trends in the automotive industry in 2025

The automotive industry has always been one of evolutionary development rather than revolutionary change. Change usually happens slowly. However, 2024 was a challenging year, with many automaker CEOs resigning; suppliers also had a hard time, with many semiconductor suppliers seeing stagnant or even declining business in 2024 despite an increase in semiconductor content per vehicle. This report presents five key trends that TechInsights believes will shape the automotive electronics industry in 2025 and beyond, explores what is needed for success, and also outlines our coverage focus this year.

Trend #1: China will drive changes in vehicle architecture

In the past, each automotive function relied on a separate electronic control unit (ECU). Now, functions are being integrated by type (domain controller), location (regional controller), or centralized in high-performance computing (HPC) units. In 2025, China will lead this trend, with its cars expected to account for more than three-quarters of global regional controller and HPC demand. TechInsights predicts that the number of global automotive ECUs will peak in 2027, with value growth driven primarily by integrated controllers.

Trend #2: Battery Electric Vehicle Production Will Grow

Battery electric vehicle (BEV) production is growing rapidly, but the growth rate in 2024 is not as expected. Despite this, the overall BEV market is still growing by about 20%, and it is expected to grow faster in 2025. Growth is mainly concentrated in China and Chinese manufacturers, making Chinese OEMs the fastest growing users of automotive semiconductors. Trump's coming to power may exacerbate the separation of the Chinese and foreign supply chains.

Trend #3: Level 2 autonomous driving becomes mainstream

Although fully autonomous driving has not yet been achieved, L2 autonomous driving is gradually becoming mainstream. L2 autonomous driving provides drivers with steering and acceleration and deceleration support, but requires continuous monitoring. TechInsights predicts that nearly 25% of cars will have this function in 2025. Mainstream automakers have turned to continuing to develop L2 systems due to financial and time pressures. By 2031, the ADAS processor market size is expected to exceed US$12 billion.

Trend #4: Artificial Intelligence is Changing the Cockpit

Although AI has been used in cars for decades, the boom in autonomous driving and generative AI has pushed it into the mainstream. The 2024 Automotive Software Survey released by TechInsights shows that the proportion of respondents who believe that AI has a great impact on the in-car experience has increased significantly. The rapid promotion of generative AI in automotive digital assistants brings huge opportunities. The key lies in meeting the needs of automakers for hybrid architectures, achieving intelligent routing, and preventing the adverse effects of AI hallucinations.

Trend #5: Inventory impact will begin to wane

Inventory impact in the automotive semiconductor industry will weaken. Industry revenue is expected to decrease by $6.4 billion in 2024, but the situation is improving, and the shortage will mainly occur in 2024. The inventory situation is changing, and some device types have shown signs of being in short supply. The situation of semiconductor suppliers will improve, and buyers should fully understand the supply and demand dynamics to ensure that appropriate supply agreements are reached.