The Automotive Reckoning Has Arrived – Are Companies Ready?

In early 2022, Stellantis CEO Carlos Tavares stood on stage in Amsterdam with a confident blueprint for the future. Fresh off uniting a sprawling family of brands—ranging from Fiat and Peugeot to Maserati, Opel, and Ram—he promised nothing short of a reinvention of the automotive industry. By 2030, he declared, Stellantis would rely heavily on software subscriptions, slash distribution costs by nearly half, and shift its entire European fleet to electric power while capturing half the U.S. EV market.

“It is our blueprint. It is about how Stellantis will engineer the future of mobility,” Tavares said at the time.

But only three years later, that bold vision lies in ruins. Tavares has stepped down, Stellantis posted a €2.3 billion loss in the first half of 2025, and his successor Antonio Filosa was forced to write off €3.3 billion in failed initiatives. A small, sobering note now sits on Stellantis’ corporate site: “Many of our Dare Forward 2030 targets have become increasingly challenging.”

Stellantis is hardly alone in its struggles. Volvo reported an €837 million half-year loss, Ford slipped into the red again, and Tesla’s automotive margins—once the envy of the industry—appear to rely more on emissions credit sales than on selling cars. What is developing is not a transient slump, but rather an existential crisis for the industry.

An Industry Out of Sync with Reality

Freepik | The car industry’s slow development process can no longer keep up with rapid global changes.

The car business has always been built on long timelines. Developing a new vehicle often requires four to five years of planning, design, and investment. But today, automakers face an unprecedented problem: the pace of global change has left those timelines nearly obsolete.

“Now, you write the plan, throw it away, and just wait,” said Adrian Hallmark, CEO of Aston Martin, at a London auto conference.

Richard Molyneux, CFO of Jaguar Land Rover, offered a similarly grim example: “We saw a 1,000 percent increase in our tariff costs into the U.S. with eight days’ notice. The industry simply cannot respond that quickly.”

Even Porsche CEO Oliver Blume admitted in a leaked memo that the traditional business model, which had worked for decades, no longer functions.

The optimism of 2021–2022, fueled by pandemic-era shortages and Tesla-inspired euphoria, gave carmakers a false sense of security. Record profits came not from sustainable strategy but from constrained supply and inflated prices. As supply chains normalized, those margins collapsed—and the reality of slow EV adoption, shaky software plans, and rising Chinese competition became impossible to ignore.

The Chinese Juggernaut

Perhaps the greatest challenge now comes from China. Once dismissed as a copycat industry, Chinese automakers have rapidly overtaken Western rivals in both technology and scale. By combining government subsidies, lower costs, and relentless innovation, Chinese firms like BYD have carved out commanding global positions.

According to JP Morgan, Chinese brands now account for 65 percent of their domestic market, up from just 41 percent in 2021. Exports are surging as well, claiming 5 percent of sales in Europe and 10 percent in Latin America.

For legacy giants like GM, Ford, and Volkswagen, the rise of China is devastating. These companies once relied heavily on Chinese demand to fund global investments. Now, as Ford vice-chair John Lawler put it, “With that gone, everybody is not going to be able to do this on their own.”

Instagram | @bydwithjavon | Chinese automakers rise fast as BYD expands its reach across global markets.

Ford CEO Jim Farley has openly admitted to being humbled by the sheer quality and cost efficiency of Chinese EVs. He frequently sends his executives to test drive new models like Xiaomi’s SU7, stripping them down in Detroit to learn what makes them tick.

The challenge extends far beyond vehicles themselves. China also dominates the global battery supply chain, holding critical intellectual property that Western companies cannot easily replicate. “People don’t realize that China has the IP that America needs,” Farley warned.

The Subscription Dream Turns Sour

When automakers revealed their ambitions for the “software-defined car,” investors salivated. Companies envisioned a future in which vehicles might be continually monetized through downloads, upgrades, and subscriptions, similar to Apple and Microsoft’s high-margin business models.

But reality has been far less lucrative. Consumers balked at paying monthly fees for basic features like heated seats or navigation. According to S&P Global, willingness to pay for linked services decreased from 86% in 2024 to 68% in 2025.

Tesla still bets big on software revenue, particularly autonomous driving subscriptions, but its long-promised “robotaxi” transformation has yet to arrive. BYD, in contrast, has flatly rejected the subscription-first model, instead bundling advanced features into its vehicles for free.

As Jefferies analyst Philippe Houchois observed, “Until you have tomorrow’s business generating cash, you need to play in last year’s game.” For automakers, that means selling cars profitably—something many seem to have forgotten how to do.

Dealers, Service, and the Shifting Value Chain

Traditional dealers have long relied on servicing and parts sales for the bulk of their profits. EVs, with fewer moving parts and lower maintenance needs, threaten that balance. BYD predicts dealer service income could fall from 50 percent to 30 percent.

Manufacturers are experimenting with new structures. Hyundai’s “fewer, bigger, better” dealership model emphasizes scale, while Ford is positioning dealers as consultants rather than salespeople, guiding customers through predictive maintenance and software use.

Meanwhile, automakers must wrestle with suppliers who control most of a vehicle’s value—especially battery makers. Renault’s Thierry Charvet bluntly noted that with batteries representing as much as half the cost of an EV, decisions about whether to build cells in-house or rely on partners will define competitiveness for years.

Ford is betting heavily on in-house production, announcing a new universal EV platform with integrated batteries. But results won’t arrive until 2027 at the earliest, leaving plenty of uncertainty.

Policy and Fragmentation

Instagram | @andysmotors | Automakers face tough choices between electric cars and gasoline cars as policies remain divided across regions.

Geopolitics has only worsened the industry’s instability. Europe remains committed to phasing out combustion engines by 2035, a timeline many executives now say is unrealistic. “We need a reality check,” cautioned Mercedes-Benz CEO Ola Källenius.

In the U.S., the picture is even murkier. President Donald Trump rolled back EV incentives and fuel efficiency penalties, forcing automakers to invest simultaneously in combustion and electric platforms. The result is spiraling costs and fragmented product lines.

As Aston Martin’s Hallmark summarized: “What’s happening is a rapid fragmentation of markets in a way that I and our business have never seen before.”

Searching for a Path Forward

Some executives still see hope in innovation. Ford believes its commercial “Pro” software business—already approaching a million subscriptions—can pave the way for consumer offerings. Hyundai insists the “software-defined car” remains the future, even if current attempts fall short.

Others, like Polestar CEO Michael Lohscheller, take a more pragmatic stance: “You have to make sure you can make money selling electric cars. Digital services won’t replace that. We are not dreaming.”

BYD, meanwhile, is proving that focus and scale can yield profitability. The company posted $5.6 billion in profit last year, while Western rivals bled billions.

As Hyundai’s Xavier Martinet put it: “When you have newcomers as strong as China’s are, you cannot be a B or B-minus. You have to be an A at least.”

Survival of the Fastest

The global auto industry has reached a reckoning point. Old assumptions about profit models, global markets, and technology leadership are collapsing under the weight of new realities: Chinese dominance, political fragmentation, and consumer resistance to subscription gimmicks.

Legacy automakers face a stark choice—reinvent themselves faster than ever or risk fading into irrelevance. In this new era, being “average” is no longer an option. The winners will be those who move boldly, adapt relentlessly, and accept that the future of cars will not be written on their terms, but on the world’s.