As global electric car markets grow, countries that are home to car manufacturing operations are faced with the challenging task of ensuring that the industry retains its domestic footprint and international revenues, or even expands downstream to become a larger supplier of final products that add more value to the economy. Among other factors, uncertainty about the pace of electrification and the cost gap with Chinese production mean most countries face tough choices as they pursue near- and long-term strategies to boost industrial competitiveness.

Where the car industry aims at pursuing electrification strategies, there are public and private sector actions that can help to close cost gaps and ensure competitiveness. These actions cover five key areas: ensuring sufficient demand and capital to unlock economies of scale and “learning-by-doing”; scaling up battery manufacturing and the skills to support it; selecting the most competitive battery chemistries and innovating the next generations; securing dependable critical minerals supplies; and minimising energy costs for manufacturers.

Each country and region has its own strengths and priorities, and national circumstances vary. But there are five main archetypes that can help explain how differences can inform distinct strategies: regaining ground internationally (e.g. European Union, United Kingdom); sharpening EV advantages (e.g. Japan, Korea); playing to domestic strengths (e.g. Canada, Mexico, United States); investing for balanced growth (e.g. Thailand, Indonesia, Morocco, Brazil, South Africa, Türkiye); seizing new opportunities (e.g. Egypt, Viet Nam, Chile, Nigeria).

Several of the archetype countries have the opportunity to build on extensive existing capabilities in internal combustion engine (ICE) car assembly and supply chains. Existing industrial clusters and know-how represent a competitive advantage, as well as a source of revenue from ICE vehicle sales as electric car markets ramp up. However, there will also be new opportunities for countries with fast-growing car markets, low energy costs and access to critical minerals. In all cases, it will not be possible in the medium term to stay competitive in a dynamic global market without effective international partnerships.

Decisions about the future of the car industry must be responsive to fast-evolving conditions, which is a challenge in a sector where it takes years from the initial design of a new car model to its market introduction. Establishing data-driven metrics for tracking progress and early course-correction will be essential to monitor emerging risks and opportunities.