Auto execs are hoping for the best and planning for the worst in 2026

DETROIT — The only consistency has been inconsistency for the U.S. automotive industry during the first half of this decade — a trend that’s expected to continue amid challenging market conditions in 2026.

The U.S. auto sector — a crucial driver of the economy estimated around 4.8% of America’s gross domestic product — has endured rolling crises since the Covid-19 pandemic shuttered U.S. assembly plants in early 2020. The global health crisis was followed by yearslong supply chain issues, semiconductor chip shortages, political whipsawing, tariffs and other challenges for all-electric and autonomous vehicles.

Automakers have been surprisingly resilient during the challenges, but those issues are now combining with more traditional industry problems of affordability and slowing consumer demand. That’s all creating a more challenging environment for automakers in 2026.

“We’ve got to plan for the worst and hope for the best,” Hyundai North America CEO Randy Parker told CNBC during an interview. “That’s the situation that we’re in right now.”

Other executives have expressed similar sentiments as they prepare for a “new” U.S. automotive industry: one that’s more expensive, smaller and, by many means, less predictable.

Automotive forecasters are calling for steady to lower sales this year, despite industry sales only hitting 16.3 million units last year. That was the highest level since the pandemic in 2020, but down from more than 17 million for five consecutive years before the global health crisis, according to industry data.

“Anyone in the auto industry … we should all be very careful about consumer demand,” Ford Motor CEO Jim Farley said Jan. 13 during an event for the Detroit Auto Show. “That’s really important.”

New vehicles prices have climbed; the average transaction price was hovering around $50,000 toward the end of last year, up 30% from less than $38,747 to begin 2020, according to Cox Automotive.

Average transaction prices historically increased on average 3.2% year-over-year, but from 2020-2022 that average nearly tripled to 9%.

“Pandemic-induced production constraints and supply chain chaos didn’t just disrupt the market temporarily. They fundamentally restructured pricing dynamics. This elevated plateau is now the new baseline, which has the market anchored at these higher price points,” said Erin Keating, Cox Automotive senior director of economic and industry insights.

It’s not just vehicle prices hitting consumers’ wallets either. They’re also dealing with inflation, increases in maintenance and repairs, and 13% annual average increases for insurance over the past five years, according to Cox Automotive.

“The cumulative weight of all these increases has pushed total vehicle ownership costs beyond reach for many middle- and lower-income households, constraining market access and accelerating the affordability crisis,” said Cox Automotive interim chief economist Jeremy Robb.

Cox Automotive reports it took 33.7 weeks of median household income to buy the average new vehicle in November 2019. Now it’s 36.3 weeks. That’s down from a record high of 42.2 weeks during the pandemic, but still means vehicles cost thousands of dollars more than historic levels.

David Christ, Toyota Motor’s U.S. sales chief, warned that the current tariff and trade environment will cause prices to continue to increase this year, despite the concerns.

“On our end, we’re just taking it month-to-month, and we’re watching the competitors closely,” Christ said on a call with reporters earlier this month. “But we feel prices are going to go up for us and for our competitors.” 

To combat the slower sales and affordability challenges, Toyota and other automakers have said they will refocus on lower-priced vehicle models — a change from recent years when automakers prioritized their most expensive, highly profitable vehicles during supply chain shortages.

“Every automaker must face the reality that the American market has changed for the foreseeable future,” said Lance Woelfer, head of American Honda Motor’s U.S. sales.

For Honda, Woelfer said that means increasing production on less expensive trims as well as focusing on certified pre-owned vehicles, which are used but backed by company warranties. For others, such as Ford, that could include reentering abandoned segments such as sedans, according to its CEO.

“Never say never,” Farley told reporters during the event in Detroit. “The sedan market is very vibrant. It’s not that there isn’t a market there. It’s just we couldn’t find a way to compete and be profitable. Well, we may find a way to do that.”

Ford sells sedans outside of the U.S. but exited the domestic market with the cancellation of the Michigan-made Fusion in 2020. It also eliminated the larger Taurus sedan and smaller Ford Fiesta and Ford Focus before that.

Ford’s crosstown rivals General Motors and Stellantis have largely exited the traditional U.S. sedan market as well.

Affordability concerns are generating attention from outside the automotive industry as well. A Senate committee led by Sen. Ted Cruz, R-Texas, requested a hearing with CEOs from Ford, GM and Stellantis about affordability and other issues in the automotive industry. The hearing was scheduled for Jan. 14 but was postponed amid scheduling conflicts and general pushback from Ford about Tesla CEO Elon Musk not attending the meeting, according to a letter from the company to the subcommittee that was obtained by Politico.

Automakers are also bracing this year for potentially volatile U.S. regulations and trade negotiations, such as the upcoming renegotiating of the United States-Mexico-Canada Agreement that’s scheduled for later this year.

Currently, automakers can import new vehicles from South Korea or Japan with lower tariffs than from Canada or Mexico, depending on their U.S. content. The Trump administration has reached trade deals on vehicles with those Asian countries but not its neighbors to the north and south.

Depending on the outcome of those discussions, USMCA could be a tailwind for automakers that have a lot of production in the U.S.

“Looking to 2026, our cycle work would suggest that autos would have a difficult time outperforming given a relatively flat y/y volume outlook. However, we see reasons for optimism for US [automakers],” UBS analyst Joseph Spak wrote last month in an investor note.

Wall Street will begin getting its first outlooks from automakers this week beginning with GM announcing its fourth quarter and year-end earnings on Tuesday, followed by Tesla on Wednesday.

GM CEO Mary Barra earlier this month reconfirmed that the automaker expects 2026 will be better than 2025.  

GM’s 2025 guidance included adjusted earnings before interest and taxes of between $12 billion and $13 billion, or $9.75 to $10.50 adjusted EPS, and adjusted automotive free cash flow of $10 billion to $11 billion, up from $7.5 billion to $10 billion.

But depending on the automaker, Wall Street analysts expect mixed results for the U.S. industry as it continues to deal with uncertain times.

“It is hard to imagine how 2026 could bring more external shocks and share price divergence than 2025 but, with no visible end to industry disruption, we are also prepared for surprises, impairments and strategic shifts,” Jefferies analyst Owen Paterson said in an investor note this month.