This study aims to systematically review and evaluate the application of magnesium (Mg) within the automotive sector, with a focus on enhancing fuel efficiency and supporting environmental sustainability. The review emphasizes the latest advancements in cast magnesium alloys, wrought magnesium alloys, and functional magnesium materials, including the development of novel Mg-based materials. The environmental impact of utilizing magnesium in automotive components is also critically analyzed. Recent innovations, particularly in the fields of nanocomposites and alloying, have significantly enhanced the mechanical properties of magnesium alloys, such as increased strength and improved grain refinement, making them suitable for high-temperature applications. The findings suggest that the competitive pricing and enhanced properties of magnesium and its alloys are key drivers for their widespread adoption in automotive manufacturing. The paper provides a detailed discussion on the current trends in magnesium alloy applications, with particular focus on the role of alloying elements and strategies to address associated challenges. This comprehensive review outlines the recent technological advancements in magnesium materials and their relevance to modern engineering applications in the automotive industry.