Automakers face Chinese competition, AI integration: Gartner
China’s pace of innovation, simultaneously managing the integration of artificial intelligence (AI), cybersecurity risks, and the complex transition to electric vehicles (EVs), will be major challenges for global carmakers in 2026, says consultancy Gartner, Inc.
The global automotive industry has entered 2026 in an environment of increasing uncertainty, with long-term predictability giving way to volatility. “Beyond 2025, marked by profit warnings, tariff shocks, and slower-than-expected adoption of EVs, the scale and long-term planning are becoming irrelevant due to geopolitical tensions, supply chain instability, and rapid technological change,” the organisation notes.
While many manufacturers see AI as a path to greater agility, Gartner warns of a looming reality check as companies realise their current AI capabilities offer less of a competitive advantage than expected, Kallanish notes.
“The automotive sector is going through a period of euphoria regarding AI, where many companies want to achieve disruptive value even before building solid foundations in artificial intelligence,” says Gartner vice president Pedro Pacheco. “This euphoria will eventually turn into disappointment, as these organisations will not be able to achieve the ambitious goals they have set for AI.”
“China will remain the most complex and crucial market, with experts arguing that success there increasingly determines global leadership,” the consultancy observes. “Strategies such as ‘Made in China, for China’, adopted by groups like Volkswagen and Audi, could become a model for others. Electric vehicles are expected to confidently enter the mainstream in Europe as battery costs fall and smaller, more affordable models emerge, supported by renewed incentives in markets like Germany.”
At the same time, most automakers will reconsider their supply chain reliance on China, even if deep technological interdependence makes complete decoupling unrealistic. Under these circumstances, Gartner concludes that the winners in 2026 will not be large companies, but rather those with agility, speed, and organisational adaptability.
Emission regulations, trade tensions challenge automotive sector
Emission regulations and growing trade tensions between China and the West, particularly in the electric vehicle (EV) market, will be major challenges for carmakers in 2025, says consultancy Gartner, Inc.
Software and electrification will remain the two main drivers of the automotive sector’s transformation, notes Gartner analyst Pedro Pacheco.
“For years, production overcapacity has been a challenge for several European and North American car factories, but the recent increase in import tariffs on Chinese EVs imposed by the US and the EU is likely to exacerbate this issue,” Gartner observes. “In response, Chinese automakers may set up factories in Europe and the US or in free-trade partners like Morocco or Turkey to maintain competitive pricing.”
According to Gartner, this situation will likely force several automotive factories with low utilisation to close or be sold to other automakers. “This will also create a domino effect, leading to the closure of supplier factories. This will redefine the car manufacturing map of the US and Europe, making low-cost countries the major hubs in the automotive production capacity and supply chain.”
The evolving political landscape in the US and EU is reopening the discussion on vehicle emission regulations, creating uncertainty for the automotive industry. As a result, some original equipment manufacturers (OEMs) may be reluctant to put EVs at the centre of their strategy, Kallanish notes.
Gartner estimates global EV (bus, car, van and heavy trucks) shipments will grow 17% in 2025. By 2030, it predicts that more than 50% of all vehicle models marketed by automakers will be EVs.
“Legacy OEMs have struggled to advance their in-house software capabilities,” the group observes. “As a result, many have made agreements with Chinese OEMs to acquire their vehicle electrical/electronic (E/E) architecture, thereby increasing their reliance on the software and hardware capabilities of Chinese EV makers.”
