Automotive Tech Evolution: What it Means for the Future of Work in 2025

The automotive industry is transitioning from traditional manufacturing toward rapid design processes pioneered within the consumer electronics industry. This transformation involves not only integrating advanced technologies into vehicles and aligning production processes but also redefining business models, talent strategies, and customer experiences. I recently discussed the impact of these trends with clients during the 2024 Paris Motor Show, and we began thinking about the outlook for 2025. We all agreed next year will be a bumpy road for sales but with the need to keep pace and focus on investments for technology to support the ongoing transformation and an evolving market.

Electrification

Despite global economic headwinds in recent years, electrification continued to grow. It’s important to remember that as recently as 2019, electric vehicles (EV) were only 3.4% of global new vehicle sales. By 2023, this figure grew to nearly 22% of total sales, and next year global sales are expected to grow more than 2% YOY (+4% for CVs).

The growth is likely to accelerate as manufacturers scale to make EVs more affordable for mainstream consumers, and government policies continue to drive the shift toward greener vehicles. In fact, there were many announcements of new and more affordable EVs during the Paris Motor Show. For example, Renault unveiled multiple new EVs with prices starting at less than €20,000 (~$21,800).

However, while the growing adoption of EVs is great news for consumers, it is creating challenges for automakers. On average, profit margins for EVs are much lower than the internal combustion engine (ICE) vehicles they are replacing. Models from established automakers are much more vulnerable to competition from new market entrants who did not have the technology for combustion engines then.

They will also have a profound impact on jobs within the industry. Since they have fewer working parts and more assembly is completed at the supplier level, new Deloitte research estimates the total workforce directly employed by the automotive original equipment manufacturers (OEMs) could shrink by as much as 50% in the future.

This does not mean the competition for skilled talent will go away, particularly as decreasing new vehicle sales margins force industry leaders to find new opportunities to create value.

New Value Chains

The growth of increasingly sophisticated vehicle connectivity, infotainment, and advanced driver assistance systems (ADAS) creates significant opportunities for automakers to create consumer value and new sources of revenue.

Today, analysts estimate 72% of passenger vehicles worldwide are “connected cars,” meaning that they are part of the Internet of Things (IoT), with an internal computer that can send and receive data, as well as communicate with other software systems.

The growth of 5G technology enhances connected cars' ability to update systems and features over the air, similar to smartphones. OEMs benefit by collecting real-world data from these vehicles to improve their digital twins.

This connectivity not only improves the value of key user interfaces such as infotainment but also lays the groundwork for increasingly sophisticated autonomous vehicles and ultimately new models of vehicle ownership.

The evolution toward autonomous driving dramatically increases the innovation focus from hardware to software. In a recent McKinsey study, most automotive leaders surveyed worldwide believed software to enable AI prediction and decision-making (76%) and perception (72%) are the most critical technologies. Most (70%) also said this will create new models of monetization for the industry.

To make matters even more complicated, these changes are happening during an era of increasing geopolitical uncertainty and de globalization. The US and EU recently levied substantial tariffs on imported Chinese EVs. They are already accelerating nearshoring momentum, which began when pandemic-era supply chain disruptions rippled through the automotive industry. In fact, more than 8 in 10 (81%) senior executives say they plan to move their supply chains closer to home, and only 2% say they have already completed their localization plans.

This will require a delicate balancing act to simultaneously manage the costs of production localization and software innovation.

Future of Work Implications

These trends are already having a significant impact on the future of work in the industry. In response to challenging business conditions, automakers around the world announced layoffs and cost-cutting measures in 2024. However, this does not mean the industry’s talent acquisition challenges are over as business needs (e.g., increasing importance of vehicle software, local production) evolve.

We are already seeing the impact on engineering roles. Historically, most of the industry’s R&D has been concentrated in mature markets, but this is changing to manage higher costs and rapidly scale up tech talent. Much like earlier shifts in the IT industry, automakers are looking to lower-cost markets, including India, to bolster their engineering workforce. The shift is occurring rapidly, and some analysts project the global market for outsourced engineering services will double by 2032.

Electrification is already driving the rapid growth of EV charging infrastructure. In the U.S. alone, a new study by the International Council on Clean Transportation (ICCT) estimates this growth will create up to 160,000 new jobs by 2032. Most of the jobs growth will occur in skilled trades such as electrical installation, electrical maintenance, charger assembly, and construction.

Localization of new supply chains will also continue to drive jobs growth. ManpowerGroup is partnering with EIT InnoEnergy in Europe as they seek to upskill and reskill up to 800,000 workers for the growing battery manufacturing supply chain.

Conclusion

It is clear the coming year will once again be a year of rapid change for the global automotive industry. Although the coming months may be particularly challenging, it is important to remember the long-term opportunities the pace of innovation will create for consumers and the automotive workforce.

Most employers worldwide (74%) still say they are struggling to find the skilled talent they need. So even as business models and workforce needs change, the need for skilled talent within the automotive industry will continue in the coming years.