The shifting center of gravity of the automotive industry worldwide
Asia and Oceania has firmly established itself as the global powerhouse of motor vehicle manufacturing, expanding by an impressive 130% over the past two decades. This surge has been driven largely by the relocation of production to lower-cost regions, most notably China, which alone accounted for 36% of global output in 2025. With the rise of electric vehicles, China has not only dominated in volume but also in manufacturing efficiency, supported by its strong integration of battery production. India is also emerging rapidly, with production up 4.0-fold and now representing 6.7% of global output. In contrast, Europe’s production has declined by 17% since 2005, while North America has seen largely stagnant growth, shaped by shocks such as the 2008 financial crisis and COVID-19.
At the same time, Asia’s domestic demand has surged: vehicle sales have grown by 170%, with China becoming the world’s largest market, accounting for one-third of global sales and increasing its volume 6.0-fold. Meanwhile, Europe has also experienced declining sales, driven by sharply rising new car prices, an aging population, and a slow transition to electric vehicles. North America has remained relatively flat.
The center of gravity of the automotive industry has clearly shifted to China. Although growth is beginning to slow, its dominance is set to persist as other regions stagnate or decline.
Asia grows; North America stagnates; Europe declines
There is no question that Asia is the global leader in motor vehicle* manufacturing, having grown by an impressive 130% over the past 20 years (Figure 1). This is largely due to many manufacturers relocating production to the region to benefit from lower costs, especially to China, which accounted for 36% of global car production in 2025. Since the emergence of electric vehicles, China has not only led in production volume but also in the efficiency of EV manufacturing, particularly due to its strong integration of battery production. Currently, the largest electric vehicle manufacturer is no longer the American Tesla, but the Chinese BYD, which also owns mines extracting raw materials required for battery production.
India should not be overlooked either. Its production has increased 4.0-fold and now accounts for 6.7% of global output. Although India’s development has been less visible compared to China’s, it has been strongly supported by government initiatives such as the Automotive Mission Plan 2016-2026 (AMP 2026) (IBEF, 2026) and the Production-Linked Incentive (PLI) scheme (Fintl, 2026). The AMP represents a joint roadmap by the Government of India and the automotive industry to position India among the top three global leaders in engineering, manufacturing, and exporting vehicles and components. Based on production volume, India has nearly achieved this goal and currently ranks fourth. The PLI scheme, launched in 2020, provides financial incentives to companies based on sales of domestically manufactured products.
By contrast, motor vehicle production in Europe is in decline (down 17% compared to 2005), largely due to the outsourcing of production to Asia. North American motor vehicle manufacturing has largely stagnated, with the 2008 financial crisis and COVID-19 having significant negative impacts. Other regions, such as South America and Africa, remain marginal, although Africa has experienced notable growth (136%).
As for Asia more broadly, domestic demand has also grown significantly alongside economic development. Motor vehicle sales in Asia have increased by 152% over the past 20 years. Within this, China has become the world’s largest automotive market, accounting for 33% of global motor vehicle sales, with sales volume increasing 5.5-fold over the same period. Although growth has recently slowed, a major shift is that Chinese consumers increasingly prefer domestic brands and are buying fewer European vehicles (ACEA, 2023). This is partly because Chinese manufacturers offer a wider range of more affordable electric vehicles compared to their European competitors.
India is also becoming an increasingly important automotive market. In 2025, car sales were 3.8 times higher than in 2005, accounting for 5.5% of global sales. Among developed Asian markets, South Korea has seen a 47% increase in sales since 2005, while Japan has experienced a decline. Japan’s declining vehicle sales are mainly due to lower domestic demand (driven by slow economic growth and an aging population, with fewer young people purchasing cars) as well as a significantly slower transition to electric vehicles.
Meanwhile, in Europe, both production and car sales have decreased. In North America, sales have largely stagnated, albeit with fluctuations. In Africa, despite growth in production, demand for new vehicles has not increased significantly. South America has seen some growth over the past 20 years, but overall, global sales growth has been primarily driven by Asia.
Figure 1: Worldwide production and sales of motor vehicles (millions), 2005–2025 (use the filter to switch between production and sales)
Source: International Organization of Motor Vehicle Manufacturers (OICA)
China far outproduces the US and Germany
In 2005, the global automotive production landscape looked very different: the largest producers were the United States (12 million vehicles), Japan (10.8 million), and Germany (5.8 million), with China already in fourth place (Figure 2). Four European countries were in the top 10: Germany, France, Spain, and the UK.
By 2025, the ranking had changed significantly. China has become a dominant player, producing more than three times as many vehicles as the United States and 8.2 times as many as Germany. India and Mexico have also emerged as major players. Mexico’s automotive industry has grown significantly due to its proximity to the U.S. market, competitive labor costs, and strong trade agreements such as the USMCA (United States-Mexico-Canada Agreement), making it a key hub for nearshoring.
Only three European countries, Germany, Spain and France, remain in the top 10. In Europe, energy prices have increased significantly, while the transition to electric vehicles has been (and continues to be) relatively slow. Battery production is heavily concentrated in China, resulting in more limited availability for European manufacturers. In addition, the pace of innovation has slowed in Europe, with new automotive innovation centers emerging primarily in Asia and North America (McKinsey, 2025). Strict environmental regulations have also placed additional pressure on the automotive industry. As a result, motor vehicle production in Europe has declined. Moreover, not only production but also vehicle sales have decreased.
Figure 2: The evolution of motor vehicle production in the largest countries, 2005–2025 (million motor vehicles)
Source: International Organization of Motor Vehicle Manufacturers (OICA)
China leads motor vehicle sales
Vehicle sales have also changed dramatically. In 2005, six European countries were among the top 10 markets. The United States led by a wide margin with 17.4 million vehicles sold, followed by Japan (5.9 million) and China (5.8 million) (Figure 3).
By 2025, China had surged to first place with extraordinary growth, selling nearly twice as many vehicles as the United States. In contrast, U.S. sales have largely stagnated over the past 20 years. India has risen to third place, while Germany has fallen from fourth to fifth, with declining sales. The reasons behind this trend are diverse. New car prices have been steadily increasing, partly due to environmental regulations, which (while beneficial for human health and the environment) require more complex and costly emission control systems and powertrain technologies, such as hybrid and electric vehicles, which are expensive due to battery costs. Socio-demographic factors also play a role, including a smaller proportion of people in age groups that typically purchase new cars. In addition, changing mobility needs and increasing competition from the East (particularly the growing presence of Chinese car manufacturers) have affected demand (KPMG, 2023).
Figure 3: The evolution of motor vehicle sales in the largest countries, 2005–2025 (million motor vehicles)
Source: International Organization of Motor Vehicle Manufacturers (OICA)
Automotive center of gravity shifts decisively to China
The center of gravity of the automotive industry has clearly shifted to China, with overwhelming dominance (Figure 4). However, both production and sales growth are now slowing. In India, volumes already place it among the largest automotive players globally, although its growth is also beginning to moderate. Meanwhile, other regions are largely stagnating or declining, suggesting that this long-term trend, the dominance of China and the increasing role of India, is unlikely to change in the near future.
Figure 4: The combined evolution of motor vehicle production and sales in the largest producing countries, 2005–2025 (millions of vehicles)
Source: International Organization of Motor Vehicle Manufacturers (OICA)
*Motor vehicle data were analyzed because passenger car categories are defined differently across countries. For example, in the United States, the most popular pickup trucks are classified as light trucks (commercial vehicles) and are therefore not included in the passenger car category, despite representing a significant share of the market and often being used as passenger vehicles. To avoid dealing with these classification differences, motor vehicle production and sales were used for the analysis. However, this approach also means that commercial vehicles are included, so the figures reflect not only passenger cars but also light and heavy commercial vehicles.
Sources
- ACEA (2023). Fact sheet: EU-China vehicle trade. Link: https://www.acea.auto/fact/fact-sheet-eu-china-vehicle-trade/
- Fintl, P. (2026). India’s Automotive Market as a Growth Engine for European Industry? ATZelectronics worldwide, 21(1), 56-56.
- IBEF (2026). Automobile Industry in India. Link: https://www.ibef.org/industry/india-automobiles
- International Organization of Motor Vehicle Manufacturers (OICA). Link: https://oica.net/
- KPMG (2023). The European automotive industry – Unlikely to return to normal. Link: https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2023/02/the-european-automotive-industry.pdf
- McKinsey (2025). A new ‘ERA’: An action plan for the European automotive industry. Link: https://www.mckinsey.com/features/mckinsey-center-for-future-mobility/our-insights/a-new-era-an-action-plan-for-the-european-automotive-industry