International Trends in the Automotive Industry

As the automotive sector undergoes rapid transformation worldwide, stakeholders face mounting pressures from technological disruption, regulatory divergence, and shifting global trade dynamics. In Europe, competition is intensifying as Chinese manufacturers gain market share while domestic original equipment manufacturers (OEMs) grapple with the energy transition and rising costs. Meanwhile, governments in the Middle East are aggressively positioning their markets as hubs for innovation, offering ambitious policies to attract foreign investment in electric vehicles (EVs) and autonomous vehicles (AVs).

Across these jurisdictions, the interplay between regulation, sustainability goals, and supply chain realignment is reshaping how global manufacturers and suppliers plan for the future.

This Insight explore competitive and regulatory pressures in Europe, strategic policy developments in the Gulf, and the implications for global automotive players navigating fragmented markets.

European Market Pressures

European OEMs face eroding profitability as electric vehicle adoption accelerates but margins shrink due to battery dependence on non-European suppliers. An impending ban on new combustion engines beginning in 2035 is driving long-term planning, although uncertainty remains. Chinese automakers are expanding aggressively, competing across premium and low-cost segments, while US tariffs are prompting European OEMs to consider new US production sites.

Compounding these challenges are rising energy costs, shortages of green hydrogen, and lagging regulatory frameworks on autonomous driving, leaving European firms vulnerable in global competition.

Middle East Policy Initiatives

In contrast, Gulf governments—especially the UAE and Saudi Arabia—are actively courting foreign manufacturers. The UAE’s national EV policy seeks 50% EV adoption by 2050, supported by nationwide charging infrastructure, tariff incentives, and regulatory sandboxes to pilot emerging technologies.

Dubai’s pioneering AV legislation provides a framework for licensing and security standards, while Abu Dhabi has already launched driverless taxi routes. Saudi Arabia’s “Vision 2030” emphasizes local manufacturing, aiming for 400,000 domestically produced vehicles by the end of the decade, backed by joint ventures, localization mandates, and heavy investment in research and development hubs. Oman is advancing more cautiously, integrating EV charging regulation into existing fuel infrastructure.

Trade, Technology, and Cybersecurity

Global supply chains remain under pressure as tariffs and geopolitical tensions drive automakers to consider regional production hubs and localized sourcing, particularly for batteries and critical minerals. At the same time, vehicles are evolving into software-driven platforms, creating new opportunities for connected services while heightening cybersecurity and data governance risks.

Partnerships across energy, mining, and technology sectors are emerging as automakers seek to balance resilience, cost, and compliance. Robust cybersecurity frameworks and diversified supply chains will be essential to managing both operational and regulatory challenges in an increasingly digital and interconnected industry.

Strategic Considerations and Opportunities

For industry stakeholders, the shifting global landscape presents both risks and openings for long-term positioning. In Europe, opportunities exist to partner with battery suppliers, scale charging infrastructure, and engage with policymakers to shape regulatory frameworks around autonomy, emissions, and clean energy. In the Gulf, public-private partnerships and joint ventures offer strategic avenues to secure incentives, meet localization mandates, and gain early-mover advantages in rapidly expanding markets.

Legal considerations remain central to this transformation, including compliance with evolving environmental and trade regulations, data privacy and cybersecurity obligations, and complex cross-border investment structures. Suppliers, investors, and technology providers must anticipate these issues early in deal planning and operational design to ensure alignment with both local and international frameworks.

Morgan Lewis’s global automotive team—spanning London, Paris, Frankfurt, Munich, Riyadh, Dubai, the UAE, China, and Japan—advises clients across the full value chain on these issues, providing coordinated support on regulatory, transactional, and compliance matters. Companies that diversify supply chains, build sustainable technology portfolios, and tailor strategies to regional contexts will be best positioned to capture value as the industry converges on a cleaner, more digital, and globally competitive future.