In 2026, accelerating trade and economic policies in the automotive sector seem likely to make it difficult for the global automotive industry to cope without new strategies. Given these recent policies, uncertainty appears to be a persistent factor for automotive manufacturers and suppliers who operate with long-term planning and complex supply chains. This emerging ecosystem makes uncertainty a critical problem for automakers already struggling with numerous structural challenges. In the long term, we see that some automakers are considering shifting production to the US or other geographies to avoid high tariffs, while brands operating particularly in the premium segment are working on new factory investments and different partnership models. As a result of these developments, an increase in costs and therefore prices seems inevitable. Price increases are likely to lead to a contraction in global demand and a decrease in revenue and profitability. While US tariffs are only a part of the global agenda, even on their own they can trigger market volatility and challenge the fundamental balances of global trade.
While tariffs incentivize local production, they also cause significant disruptions for manufacturers in the process of restructuring their supply chains. The US electric vehicle market, expected to reach US$233 billion by 2032, will be noteworthy. Chinese manufacturers face limited access to the US market, forcing them to turn to alternative markets such as Europe, Turkey, and Southeast Asia. In Asia, India is increasing its local production through various incentives and programs, benefiting from shifts in tariffs. Major European car manufacturers face higher tariffs on exports to the US, and as a solution, they will focus more on increasing sales within Europe and regional partnerships. Southeast Asian countries are attracting investment by offering duty-free or advantageous zones for component production and assembly; while Latin America is positioned as a potential production center for electric vehicle components due to its proximity to North American markets.
The potential of countries in terms of critical minerals and their control over these resources will directly shape not only economic recovery and national sovereignty but also global and European energy security. These dynamics indicate that the strategic decisions countries will make in the coming period will be shaped around critical minerals, which are seen as the "foundation of the 21st-century economy." Graphite plays a fundamental role in the production of electric vehicle batteries. Deposits of copper, lead, zinc, silver, nickel, cobalt, and manganese are also of significant importance. These critical minerals are emerging as the "foundation of the 21st-century economy." Essential for renewable energy and industrial infrastructure in the 21st century, these critical minerals are increasingly strengthening the geopolitical and geo-economic position of countries possessing them. This is of great importance for countries seeking to reduce their dependence on China, which controls 75% of the world's rare earth deposits, and batteries stand out among the applications of these critical minerals.
Copper, lithium, nickel, cobalt, and rare earth elements are essential components in many areas, from electric vehicles to other clean energy technologies. With the acceleration of the energy transition, the demand for these materials is also rapidly increasing. The types of mineral resources used vary depending on the technology. Lithium, nickel, cobalt, manganese, and graphite are highly important resources in terms of battery performance. Rare earth elements are prominent in the production of permanent magnets used in wind turbines and electric vehicle motors, while electricity grids require large quantities of aluminum and copper. These minerals form the cornerstone of electricity-focused technologies.
Although innovation in the battery industry continues unabated, the degree of concentration in supply chains has led to security concerns among governments in recent years. Since diversifying battery production and supply chains takes time, countries seeking to increase production need time and investment to support local manufacturing, develop technical expertise, and reduce the cost gap with China. While these efforts are crucial to supporting the demand for sustainable batteries, electric vehicle sales, which currently account for 85% of the battery market, stand out as the only driver capable of creating sufficient scale. Strategically deploying automation, digitalization, and innovation will also play a significant role in achieving sufficient production efficiency to compete with Chinese manufacturing and diversifying supplies.
Joint ventures or technology licensing agreements with battery manufacturers can contribute to the formation of strong local supply chains by reducing the time and investment required for local battery production. International collaborations are a crucial element in this regard. Many countries do not have the market size to meet the necessary investments for battery and component production on their own. In this case, cooperation with resource-rich countries becomes inevitable.
