Current Issue

The EV push has slowed in recent years and a predicted dip in auto production in 2025 won’t change that.

While the North American automotive market has been relatively flat over the past year or so and is generally expected to remain so this year, that is far from certain. 

There are a considerable number of unknown factors that could affect not just overall light vehicle  production, but also the mix of those vehicles and of their metal content. This comes as automakers are generally taking a wait and see stance until there is more clarity about how governmental policies will change under the Trump 2.0 administration and how they will impact the market. 

“Actually, North American sales and production have been on a wild ride for a while,” says Mike Wall, executive director of automotive analysis for S&P Global Mobility. That ride started in 2020 with the impact of the COVID pandemic when North American vehicle output fell to about 13 million units, followed by the resultant supply chain issues. Then there was a rebuilding of inventories and subsequent drawdown. 

But Wall notes that even though the state of the auto industry remains generally positive from a consumer demand perspective, North American vehicle production hasn’t yet  gotten back to the 16.3 million vehicle level it achieved pre-COVID. In fact, after peaking at 15.7 million units in 2023, it eased to 15.4 million vehicles last year and, without even considering the potential 25 percent tariffs on Canadian and Mexican auto imports and other governmental policies, Wall forecasts that North American output could fall further in 2025 to about 15.1 million vehicles. That’s in part due to the fact there are still inventories that need to be worked down. 

But it is widely believed that governmental policies will also have an effect. In fact, Brian Esterberg, senior automotive market strategist for the American Iron and Steel Institute believes the automakers will undoubtedly adjust their product offerings and production strategies in response to changing market dynamics and regulatory policies. 

Mark Schirmer, director of Industry insights at Cox Automotive, points out that automakers want the certainty they get from long-term, consistent policies that enable them to make necessary investment and business decisions. However, he says, the uncertainty surrounding such factors as tariffs, interest rates, fuel economy and electric vehicle incentives has resulted in some paralysis, as it is making it hard for the auto OEMs to make such plans.

Philip Gibbs, a senior equity research analyst at KeyBanc Capital Markets, says one problem is this hasn’t been a typical U.S. election cycle. He explained that usually in the United States there is more clarity when an election ends. 

“But this time even though after the election everyone wanted to be optimistic, believing that Trump is pro-business, many companies don’t believe that is the case with his recent actions. Rather they see those actions as being more pro-confusion and pro-inflation,” Gibbs says, adding, “Until the rules of engagement are hammered out, it will be more of a transitory period with everyone trying to figure out what’s next and how to run their businesses.”

Perhaps the biggest problem, says John Anton, director of S&P Global Market Intelligence’s pricing and purchasing service, is the Trump administration has been constantly changing its policies – particularly the tariffs being discussed. That has recently been the case both for tariffs on auto imports and for those on steel and aluminum. 

For example, Bertrand Rakoto, director of Ducker Carlisle, notes that after talking with the U.S. Big Three automakers, Trump delayed his proposed 25 percent tariff on auto and auto parts imports for a month, until at least April 2. However, at this time there still hasn’t been much communication about when that tariff will be enacted, on what countries’ imports tariffs will be enacted and for what types of vehicles and/or parts or components. Moreover, it’s unknown if the  outcome could be influenced by negotiations with Canada and Mexico or other countries on certain other tariffs. 

Similarly, he points out there is still some uncertainty about the nature of the 25 percent steel and aluminum tariff that was approved March 12 after being delayed a month and the brief speculation that the Canadian tariff would be doubled to 50 percent in retaliation for Ontario’s electricity surcharge on three U.S. states. Trump, however, backtracked on the Canadian when Ontario suspended that surcharge. 

If that 50 percent had remained, it would have been very impactful on the ability of automakers to get the aluminum and steel they need. For example, says Kaustubh Chandorkar, head of North American aluminum analysis for CRU, 70 percent of the United States’ primary aluminum comes from Canada. 

Rakoto notes it is still uncertain when steel and aluminum tariffs will start to be paid, leaving some room for further negotiation. There is also question whether there could be a reaction given some expected retaliatory action, including by the European Union and possibly by Canada and other countries upon a variety of U.S. products – not just those that are metals containing. He also points out there would be less impact on the cost of the vehicle (8 to 9 percent) due to the steel and aluminum tariff than if the auto tariff is enacted.

The consequences will be different for steel and aluminum given that the previous steel tariff was already 25 percent for countries that didn’t have exclusions and quotas while the aluminum tariff was raised to 25 percent from 10 percent. 

Also, there are some expectations that some of the Trump administration’s policies could impact the auto market in other ways – including its vehicle and materials mix.  

Even under past administrations, internal combustion engine vehicles remained the vehicle of choice in the U.S. However, partly due to certain incentives, such as those included in the recently passed Inflation Reduction Act, as well as a general push for greater sustainability and lower carbon emissions, demand for electrified vehicles such as battery electric vehicles and hybrids have been picking up – albeit not as quickly as some had expected. 

Jack Pell, vice president of distribution and regional sales for Hydro Extrusion North America, points out that five years ago it was widely expected that EVs would have a 25 to 30 percent share of the U.S. auto market by this time. That hasn’t happened. 

While clearly up from a 1 percent share in 2019, consumer demand for BEVs is not as strong as U.S. automakers had hoped and planned for, S&P Global’s Wall says. Those vehicles accounted for only about 8 percent percent of light vehicles sold in 2024 and expectations are that it will only grow to a 10 percent share this year, given the still-strong consumer interest in ICE  vehicles and increasing interest in hybrids. 

Bill Rinna, director of Americas vehicle forecasts for Global Data, points out the expectations the Trump administration will likely put some downward pressure upon the BEV market, especially given the low-cost fossil fuel environment and the higher cost of BEVs vs. ICE vehicles. 

On the other hand, the president’s close relationship with Elon Musk clouds those expectations, notably after the president welcomed the CEO to the White House to promote his company in response to protests and property damage to Tesla and adjacent products.

Rinna also points out that given range anxiety with the fact that its battery pack adds mass to BEVs, the availability of charging infrastructure, which pales when compared with that in China and many other countries, has also kept some U.S. buyers out of the BEV market. 

Amid this dynamic, Rinna observes that some BEV programs have been pushed back, delayed or canceled by legacy and startup BEV OEMs, both because of weaker than expected demand and the expected impact from some of the Trump administration’s policies. 

For example, Leonard Ling, Ducker Carlisle’s automotive knowledge manager, notes that production at Ford’s new West Tennessee plant has been delayed from 2025 to 2027, Toyota delayed the start of EV production at its new North Carolina plant until the first half of 2026 and after delaying EV drive unit production at its Toledo, Ohio, Propulsion Systems plant until the fourth quarter of 2024, General Motors is also delaying the start of battery production at its Indiana plant. Also, Hydro’s Pell notes that for the first time in its history in 2024, Tesla’s EV builds were lower year over year. 

S&P Global’s Wall says this is coming as consumers are voting with their dollars and, therefore, either showing growing interest in ICE vehicles that are still getting some strong fuel efficiency gains or in hybrid vehicles that have some fuel-efficient options. Rinna notes that currently ICE vehicles have a 75 percent share of U.S. sales, down from 95 percent in 2019 while the hybrid share increased to 12 percent from 3 percent. 

“Hybrids are a great bridge between ICE vehicles and BEVs,” Hydro’s Pell says, explaining, “If you have range anxiety, hybrids could fix that as you can always get anywhere when you need to.”

Even with these dynamics, including the potential for the Trump administration to eventually change the U.S. emissions and fuel efficiency regulations that will remain in place until 2026, Abey Abraham, Ducker Carlisle’s managing principal, says there will continue to be a mixed-mosaic materials approach for automakers to further lightweight their vehicles with no one silver bullet strategy for doing that. 

Abraham says that automotive engineers are comfortable using a lot of different materials, depending upon the application. “It is no longer taking square peg and trying to fit it into a round hole. Automakers need to be very precise about how to control the weight of vehicles and to balance that with their cost,” he explains, while also noting they must manufacture vehicles that consumers want to drive, which isn’t an easy task. 

CRU’s Chandorkar points out there is always some competition, based upon the type of vehicle as well as because of lightweighting and performance issues. For example, he observes that BEVs generally use about 30 percent more aluminum – both sheet and extrusions – than ICE vehicles. But he says that while overall aluminum could see about 6 percent growth, it is seeing competition from steel use, particularly advanced high-strength steel. That material, while more expensive than some of the mild steel it is replacing, is still less expensive than aluminum. 

S&P Global’s Anton says that with the capacity that has recently come online or is expected to come online soon, including Steel Dynamics’ Sinton, Texas, mill, Nucor’s expansion in Gallatin, Ky., and another Nucor new mill that could come start up next year, U.S. steelmakers – including electric arc furnace steelmakers – should be able to increase their auto exposure. 

One question is whether EAF steelmakers will be able to produce exposed auto sheet, as has been their goal, given that those grades are somewhat difficult to make, Ryan McKinley, a senior CRU steel analyst, admits. Even without doing that, he points out that the auto sector uses a lot of steel. The average North American-produced light vehicles contains about a ton of steel, although that average is lower for BEVs – about 0.8 ton per vehicle. 

Overall, 2024 was a pretty solid year for the North American auto market, S&P Global’s Wall says, and while production will slip slightly this year, it will remain well above pandemic lows but not yet get back to pre-COVID highs. However, as long as the market doesn’t blow up because of the tariffs, production gains will likely follow in 2026.

[Caption:]
Auto production is expected to slip a little in 2025. (Photo courtesy Stellantis)