As the late 20th-century poets Smash Mouth once said, “the years start coming, and they don’t stop coming.” It’s easy to get a little overwhelmed by the never-ending march of time, but as 2025 recedes into the rearview mirror, we thought we would take the opportunity to catch our breath and look back on some of the trends and technologies that shaped the auto industry over the last year.
It was an exciting year full of unexpected surprises, new records, and intriguing, digitally-driven advancements that helped to create some of the most sophisticated models in recent memory. From new hybrid vehicle technology and a fresh wave of sustainable, affordable EV batteries to rapidly growing Chinese brands, advanced hands-free driving technology, and new AI-powered features, join us as we take a look at the year that was 2025 and try to predict where the industry is headed as we enter the next quarter-century.
Hybrids Growing, EVs Slowing
Last year saw mixed news for the EV segment, but hybrid models continue to outperform their all-electric competitors in the U.S. market. While EV sales were strong at the beginning of the year, the expiration of the Federal EV tax credit in September led to collapsing sales in Q4. However, hybrid models enjoyed their best year to date with a 28% bump in sales when compared to 2024.
EVs now account for around 7.7% of all new vehicle sales, while hybrid models trend a little higher at 12.7%. While all-electric vehicles almost certainly represent the wave of the future, concerns about cost, range, and charging infrastructure have led more drivers to embrace the hybrid approach.
Since 2018, the price of a new EV has dropped by as much as 25 percent as automakers scale up production and embrace new, more affordable battery technology. However, the average EV still rings in at around $58,000, compared to $33,000 for a hybrid. Plug-in hybrids (PHEV) tend to trend a little higher, but are still more accessible than their all-electric counterparts.
The recent cancellation of the $7,500 federal EV/PHEV tax credit is also impacting the affordability of electric vehicles, and it doesn’t look like the program will be returning anytime soon, as the current administration looks to significantly weaken industry-wide fuel economy standards.
It might seem like a step in the wrong direction, but the EV segment’s current struggles do create a unique opportunity for hybrid models. Once seen as interim technology intended to bridge the gap between internal combustion technology and all-electric vehicles, some studies indicate that hybrids could now enjoy double-digit growth throughout the rest of the decade.
There’s also an intriguing new option on the horizon in the form of extended-range electric vehicles (EREV), which seek to combine the best aspects of hybrid and all-electric options. Like a hybrid, EREVs are designed with both electric motors and a gas engine, but the latter is reserved for charging the vehicle’s battery rather than providing pure propulsion.
This approach could help to alleviate any range-related anxiety, making an EREV a more practical choice for drivers who aren’t looking to make a major lifestyle change. Ford has already announced that the full-size F-150 Lightning pickup will ditch its EV powertrain for an EREV alternative, while Ram and the revived VW-led Scout brand look to follow suit with their own EREV models.
New Batteries, Cheaper EVs
EVs also tend to be pretty pricey when compared to their gas-powered rivals, which posted an average sale price of around $50,000 in 2025. While buyers are accustomed to paying a little extra for the ability to get their hands on the latest and greatest technology, the high cost does seem a little strange when you consider the relative simplicity of EVs when compared to internal combustion vehicles. So aside from their novelty, what makes EVs so expensive? In short: the battery.
The lithium-ion batteries used to power modern EVs can account for up to 40% of the vehicle’s total cost, with replacements potentially running over $20,000 for full-size pickups. Luckily, there’s a little relief on the horizon in the form of new lithium-iron-phosphate (LFP) batteries.
Nickel-manganese-cobalt (NMC) batteries have powered much of the EV segment for the last decade, but the innovative new LFP formula can slash prices by ditching expensive elements like cobalt in favor of affordable iron and phosphate alternatives. LFPs actually have lower energy density than NMCs, but they’re much cheaper to produce and are said to offer a longer service life.
Ford and Chevy have been leading the charge in the development of the LFP batteries, with the Blue Oval investing $3 billion in a new Michigan battery plant and the Bowtie Brand tapping the technology to power its new-and-improved 2027 Bolt.
Chevy’s redesigned subcompact crossover employs a 65 kWh LFP pack that offers 255 miles of range, which is an eight-mile improvement over the previous NMC version. Best of all, the battery will cut production costs and allow the 2027 Bolt to hit the market for just over $28,000.
These LFP batteries could well be the catalyst that ushers in a new wave of ultra-affordable EVs, and also provide a more sustainable alternative that meshes with the segment’s eco-friendly appeal.
China Gains the EV Highground
Chinese luxury and performance brand YANGWANG made headlines in late 2025 when its U9 Xtreme set a new top speed record for a production EV at Germany’s Automotive Testing Papenburg (ATP) track. The sports car achieved a speed of 308.4 mph, and then doubled down on its high-performance appeal a month later with a sub-seven-minute lap time at the famed Nürburgring Nordschleife.
It’s an impressive feat by any measure, and it points to a larger trend that’s sure to shape the auto industry for years to come. While European and American automakers have typically led the way in the high-performance segment, the YANGWANG U9 Xtreme proves that the balance of power is now shifting to the East as Chinese brands continue to expand their technical and production capabilities.
Just take China’s largest automaker BYD, which also happens to produce the U9 Xtreme under its YANGWANG subbrand. The auto company was only founded in 2003, but has already grown into one of the world’s largest automakers, with over 4.6 million sales in 2025. Even more impressively, a focus on all-electric technology saw BYD become the world’s largest EV brand, surpassing Tesla in late 2025.
A commitment to vertical integration has played a major role in the company’s success, with BYD producing not just its own EV batteries but also all its own microchips through its BYD Semiconductor subsidiary. This strategy allowed BYD to weather the supply chain issues presented by the Covid-19 pandemic and gobble up market share during a period when other automakers were relatively stagnant.
BYD might be the poster child for China’s automotive success, but it’s not the only name to emerge from the People’s Republic. Chinese state-owned Changan and Geely weren’t far behind, while SAIC, FAW, and Dongfeng are among the country’s other major state-owned brands. While these automakers have yet to make major inroads in the North American market, BYD is steadily expanding its global presence by supplying electric buses, taxis, and cars to Latin America, Europe, and even the U.S.
It’s an impressive turnaround for a growing superpower that was producing just 2 million vehicles as recently as 2000. It was the fateful decision to join the World Trade Organization (WTO) in 2001 that really improved the country’s automotive fortunes and led to a brief period of double-digit sales growth. With 1.4 billion domestic customers and strong state support, it’s hard to imagine a future in which Chinese brands aren’t a force to be reckoned with.
New AI Features
Love it or hate it, artificial intelligence (AI) is here to stay, but how is it being deployed in today’s vehicles? Automakers are always on the hunt for cutting-edge tech that’ll help them set their vehicles apart from the crowd, and AI presents an exciting opportunity to bring a new level of convenience to the daily driving experience.
An integrated, conversational AI assistant is the most obvious car-based application, which isn’t really that different from how one would use AI in their day-to-day life. Google’s Gemini system will make its way into a number of GM models in 2026 and promises to give drivers a less formal way of interacting with their vehicles.
We’ve grown accustomed to conversing with computers in a formal, stilted manner that often leaves the user feeling a little robotic in their own right, but these advanced AI systems are designed to better understand natural speech patterns and the context of any given inquiry or command. Mercedes-Benz has leveraged the power of ChatGPT to achieve a similar goal, and China’s Nio brand even offers an AI-powered system that is designed to learn a driver’s habits and adjust their comfort and convenience settings accordingly.
While automotive AI systems are currently tasked with handling comfort-, convenience-, and infotainment-related features, it’s easy to imagine how the technology might work its way into every corner of your vehicle in the coming years. Hyundai and Tesla are already using AI to enhance their advanced driver-assistance systems (ADAS), and the technology holds a lot of potential when it comes to the future of hands-free driving tech.
Most of today’s hands-free systems employ a traditional rules-based approach to automation, but AI could allow for a more interpretive approach that offers a little more flexibility and a more natural driving style. Phillips and Continental are even working on AI-enabled biometric sensing systems complete with cameras, lasers, and other sensors that can be used to automatically adjust the climate controls, lighting, and audio volume or even selectively deploy airbags based on each passenger’s location and size.
From proactively diagnosing maintenance and repair issues to creating a seamless user interface that will allow drivers and passengers to interact with their vehicle through voice- and gesture-based controls, AI is almost certainly bound to change the way we experience life behind the wheel.
The Rise of Hands-Free Driving
AI isn’t the only modern technology that’s changing the way we enjoy our daily commute or weekend road trip. Hands-free driving has come a long way since GM debuted the industry’s first Level 2 system back in 2017, steadily expanding its coverage and capabilities to provide drivers with a convenient new way to hit the road.
That said, current systems aren’t quite up to the “set it and forget it” standard that’s been depicted in so many sci-fi movies, shows, and novels. Even the most sophisticated Level 2 hands-free systems like GM Super Cruise, Ford BlueCruise, and Tesla Full Self-Driving still require drivers to keep their eyes on the road and be ready to take the wheel at any given moment, but that could soon change as new Level 3 technology begins to hit the market. While Level 2 systems offer partial automation, Level 3 hands-free tech delivers conditional “eyes-off” automation that significantly ups the convenience factor.
These Level 3 systems are still in their infancy and are currently reserved for a few lucky luxury models from Mercedes-Benz. Honda has created a Level 3 system called Sensing Elite, but like BMW’s Personal Pilot, it’s not available on the U.S. market. Mercedes-Benz was the first to market with its Level 3 Drive Pilot system, but the hands-free system can only be used during daylight hours when traveling at less than 40 mph on pre-mapped roads in California and Nevada.
There is some hope on the horizon for those who aren’t shopping on the luxury end of the market. Some of the country’s largest automakers—including Ford and GM—have announced plans to unveil their own Level 3 systems in 2028. EV startup Rivian is also targeting a 2026 debut for its Level 3 system, and certain Volvo EX90 drivers might already be driving around in a Level 3 vehicle.
There’s one major caveat when it comes to Volvo’s hands-free tech: while the full-size EX90 crossover boasts all of the hardware required for Level 3 automation, including ultrasonic sensors, cameras, radars, and even lidar, Volvo has yet to activate the feature due to regulatory hurdles. The brand’s Pilot Assist hands-free system could be enabled via over-the-air (OTA) updates as soon as Volvo gains approval, but that could take a while, given the government’s typically glacial administrative pace.
Cruising Into the Future
There’s a lot to be excited about as we cruise into 2026. While EVs have lost a bit of their initial luster, the technology is still making inroads while hybrid models enjoy consistent growth. A new generation of LFP batteries should help improve EV affordability while also providing a greener, cleaner option with less environmental impact.
Advanced AI systems hold the potential to transform the driving experience and create a bespoke ride, and will certainly play a role in the development of Level 3 hands-free driving tech and beyond. While there are still some challenges around affordability and many kinks to work out when it comes to achieving full, hands-free automation, these growing pains are part and parcel of any new technology.
The growing influence of Chinese brands is sure to change the automotive landscape. However, only time will tell if the country can maintain its historic growth to become the industry’s undisputed leader. They say change is the only constant, and we’ll do our best to keep you in the loop as we celebrate the dawning of a new year here at AutoInfluence.
