Hisayoshi (Pat) Takahashi, Partner, CPA, and Deloitte Asia Pacific Auto Sector Leader, emphasizes the future of mobility’s relevance today as EV adoption, China’s dominance, tariffs, digital innovation, and shifting consumer preferences reshape global automakers’ strategies for competitiveness and sustainability.
I’m from Nagoya, Japan, which lies between Tokyo and Osaka, very close to the Toyota head office. I was born and raised in that area, so naturally, I’ve been a long-term Toyota driver. In fact, throughout my entire career, I’ve only driven Toyota cars. Toyota is also one of my biggest clients.
Today, I’d like to touch upon three broad areas: global trends, the China market and Chinese OEMs, and issues arising from the Trump administration’s policies.
Global Trends in the Auto Industry
Let me start with global trends. There are five key hot topics in the auto sector right now:
Software-Defined Vehicles (SDVs): SDV has become a buzzword, though the definitions vary. The important point is that software is fundamentally changing the automotive industry. Cars are no longer just mechanical products; the software portion has grown significantly. Traditional OEMs must shift their business models from simply selling vehicles to offering software upgrades and services. This requires not only a new business mindset but also hiring more software engineers to stay competitive.
Affordability of Cars: Car prices are rising steeply. Even without accounting for the new features and changes in powertrains—such as hybrids and plug-in hybrids, the average car prices have gone up, making it more difficult for consumers to buy new cars.
Partnerships and Consolidation: With massive investments needed in batteries, EVs, hybrids, and autonomous driving, OEMs cannot survive alone if they aren’t profitable. Partnerships, joint ventures, and even mergers are becoming necessary. For example, Nissan attempted to merge with Honda. Although the deal didn’t succeed, such integration efforts are expected to continue.
China’s Growing Market: China has become the largest car market, with strong new players like BYD and Geely. Their cars are improving rapidly in quality and design, making them very competitive globally.
Impact of the Trump Administration: Policy uncertainty remains a major issue. Tariffs as high as 25–30% have been imposed on Japanese, Mexican, and Canadian imports, affecting not just cars but also auto parts. This has created enormous pressure on OEMs’ costs and profitability.
Consumer Trends from Deloitte’s Global Survey
Every year Deloitte conducts a global automotive consumer survey, with summaries available by country—including India. The survey covers EV adoption, charging concerns, connected features, branding, MaaS (Mobility as a Service), and autonomous driving.
Battery EV Adoption: A few years ago, EVs were seen as the future, but adoption is slowing, except in China. In the U.S., over 50% of consumers still prefer gasoline or diesel vehicles. Concerns remain around driving range, charging infrastructure, charging time (30–60 minutes), and safety issues such as battery fires.
Brand Loyalty: Consumer loyalty to car brands is weakening. Many are open to exploring new brands, which is a challenge for OEMs trying to retain customers.
Autonomous Driving: After some setbacks due to accidents and regulation, autonomous driving is making a comeback and is expected to progress steadily in the next few years.
MaaS (Mobility as a Service): Younger generations increasingly prefer access over ownership, opting to use cars rather than buy them.
Tariff Impacts under the Trump Administration
For Japanese OEMs, the impact of tariffs could be severe. Estimates suggest that Toyota could see a 23% decline in operating income, Honda around 38%, Subaru nearly 86%, Mazda about 64%, and Mitsubishi around 30%, while Nissan could face the harshest blow with losses amounting to nearly 600%, implying a shift into negative profitability.
The impact varies depending on how much production is U.S.-based versus Japan-based. Toyota’s leadership has stated that they will not restructure their supply chain immediately but will absorb costs in the short term, helped by the weaker Japanese yen, which boosts export profitability. Still, long-term adjustments will be unavoidable.
China’s Auto Market Dynamics
China remains the largest auto market, with 22.9 million units sold last year and 8.8 million in the first five months of 2025 (a 9.1% increase). Growth is driven by government subsidies and strong support for new energy vehicles (NEVs).
Beyond subsidies, the government in China has also relied on policy tools such as stringent licensing rules—for example, in Beijing, a license plate for a gasoline vehicle can cost as much as $10,000 and is difficult to obtain, whereas plates for New Energy Vehicles (NEVs) are far easier to secure. This push has created clear winners and losers: Chinese brands like BYD and Geely are growing rapidly, expanding their domestic dominance and capturing export markets, while established German, Japanese, and U.S. automakers are steadily losing market share.
At the same time, aggressive price wars—often triggered by Tesla—have driven margins to extremely thin levels, posing significant profitability challenges for many Chinese OEMs. With competition at home intensifying, Chinese automakers are increasingly turning to overseas markets, with Mexico overtaking Russia as the leading export destination, followed by the UAE and others.
The global auto industry is undergoing rapid transformation, shaped by software innovation, affordability pressures, consolidation, China’s rise, and policy uncertainty from the U.S. These forces will continue to challenge OEMs worldwide, requiring them to adapt quickly in both strategy and execution.
Q & A
Q: What are the most critical success factors behind China’s rapid EV infrastructure growth? Can India replicate it?
A: In China, there are several factors behind the success, but the most critical one is technology development. China has moved very quickly in high-tech areas such as AI, batteries, and digital platforms, and has built strong domestic supply chains. What makes China unique is the close collaboration between technology companies and traditional OEMs. This seamless integration of technology, supply chain, and manufacturing has been the biggest success factor, surpassing government support or policy incentives.
Q: How do Japanese automakers balance between hybrid, hydrogen, and full EV powertrains?
A: For Toyota, the strategy is to keep every possible powertrain option open for the next generation. That means investing simultaneously in battery EVs, hydrogen fuel cells, plug-in hybrids, and conventional hybrids. Toyota believes in a multi-pathway strategy rather than committing to a single technology.
Nissan, on the other hand, has focused almost exclusively on battery EVs in recent years and does not have hybrid options. This creates challenges because, in Japan, consumers still see hybrids as the most realistic and practical choice. Many customers feel that full battery EVs are not yet viable, while hybrids—particularly plug-in hybrids—remain highly attractive in the Japanese market.
Q: Do you foresee mobility solutions evolving in rural areas across Asia where infrastructure remains a challenge?
A: In Japan, for example, EV charging stations are available, and the government is trying to promote their use not only in cities but also in local areas. However, because the actual usage of these charging stations remains low, many of them are shutting down. The key success factor will depend on how effectively existing infrastructure can be utilised. When it comes to rural areas, relying only on battery EVs may not be practical. Alternative powertrains—such as flywheel hybrids or other technologies—will likely be necessary to provide realistic and sustainable mobility solutions.
Q: What is the status of lithium battery technology? Are there alternative battery materials on the horizon?
A: Solid-state battery technology is already under development and is expected to reach the market within the next couple of years. This could be a real game-changer, as it does not require lithium, which currently has to be imported from China. While lithium batteries remain important today, solid-state batteries are likely to transform the industry in the coming years. Hopefully, one of the Japanese battery manufacturers will be among the first to bring this technology to market.
Q: Are there any future plans to convert gasoline cars into electric vehicles?
A: I don’t think any car makers are currently considering that approach.
Q: How is Japan leveraging AI and IoT for mobility?
A: AI is a very interesting topic, but the most advanced adoption is happening in China. For example, if you visit the Shanghai Auto Show, you’ll see many cars already equipped with AI technologies. To be honest, Japanese OEMs are still lagging in areas such as connectivity and in-car systems. Hopefully, Japanese and even German OEMs will soon catch up, integrating AI not just into the vehicles themselves but also into broader areas like in-car entertainment and connected mobility services.
Q: Is the rise of Chinese battery manufacturers creating a new form of strategic dependence in the mobility value chain?
A: Yes, it is. The dominance of Chinese battery makers, coupled with the Chinese government’s control over exports of critical materials, is creating a significant dependency. This has become a key negotiating point between China and the U.S. government, and it affects the global mobility value chain. At present, Chinese manufacturers hold a strong position, but this also highlights the urgent need for other global players to develop new technologies and alternative materials that reduce reliance on China.
Q: What areas can India focus on to gain a global lead?
A: One promising area is India’s strength in engineering and scientific capabilities. As I mentioned earlier, the keyword for the future is SDV—Software Defined Vehicles. The industry will need a large number of engineers to develop advanced software and control features for vehicles. India, with its vast pool of skilled engineers, is well-positioned to contribute significantly. Not only Japanese OEMs but many global manufacturers are already seeking alignment with Indian teams for software development. This could become a key area where India makes a strong contribution to the global automotive sector.
Q: With shared mobility becoming a cheaper option, will this trend affect future car sales?
A: Among younger generations, cars are increasingly seen as mobility tools rather than assets to own. However, in some countries, owning a car still carries cultural or social value. The impact will therefore vary by region. In cities, where services like Uber are easily available, shared mobility may reduce the need for ownership. But in smaller towns or rural areas, where such services are limited, personal ownership will likely remain important. Ultimately, whether people choose ownership or shared usage will depend on country-specific factors and the urban–rural divide.
Q: What are the cybersecurity and data privacy concerns arising from increasing digital connectivity in mobility?
A: Yes, this is a critical area, and at Deloitte we are actively working on it. With the rise of Software Defined Vehicles (SDVs) and connected mobility, cybersecurity has become central to both safety and compliance. International regulations now require stringent protection against cyberattacks, not only to safeguard data privacy but also to ensure passenger safety. As a professional services firm, we are working on platforms and frameworks to help protect connected vehicles from such threats and ensure they remain secure and reliable.
Q: What policy innovations do you foresee emerging in Asia-Pacific to address inter-modal integration and rural–urban connectivity?
A: At the moment, I haven’t seen any strong model cases from policymakers. While efforts are being made, the core challenge remains: who bears the additional cost of such policies? If governments or taxpayers cover it, implementation is possible. But if the burden is placed on commercial companies alone, it becomes very difficult. The key will be designing schemes that clearly allocate costs and benefits across stakeholders. Until then, there isn’t a fully successful case to point to, and cost-sharing remains the most critical factor.
Q: How are automotive manufacturers adapting to semiconductor shortages, and do you foresee long-term localisation trends in Asia-Pacific?
A: A couple of years ago, many OEMs struggled with severe chip shortages. To address this, manufacturers have pursued two or three strategies. One is building stronger, long-term partnerships with global chipmakers to secure supply. Another is developing in-house capabilities through group companies. For example, within the Toyota Group, Denso produces its own chips, and other group firms also manufacture critical components. This kind of internal production reduces dependence on external suppliers. Looking ahead, as Software Defined Vehicles (SDVs) become more prevalent and demand for chips increases, localisation and deeper collaboration with technology partners will be critical. Semiconductor security has become a central challenge for all OEMs.
Q: With the transition to electric vehicles imminent, how do auto component manufacturers across the globe prepare for this shift? Since many currently supply parts for internal combustion (IC) vehicles—which may disappear in the next 10 years—the value chain for EVs and hybrids will look very different. How do they manage this transition?
A: In the long run, battery EVs are indeed the right direction. But the key question is how soon that future will arrive. The transition will not be uniform—it will vary by country, by city, and even by local conditions. This means we will go through a long mixing period, where different powertrains will coexist.
A few years ago, many OEMs assumed that a 100% battery-EV world would come very quickly, and they shifted their focus entirely. But now they realise that this was premature. Realistically, it may take 10 to 15 years before EVs dominate completely. Until then, hybrids and even improved gasoline engines will continue to play a role.
For auto component manufacturers, this creates a challenge but also an opportunity. They must craft flexible strategies, deciding when, how much, and in which technologies to invest, to balance current IC and hybrid demands while preparing for an EV-dominated future. This staged approach will be critical for managing risk and staying competitive through the transition.
