Auto executives hope for the best and plan for the worst in 2026

DETROIT – The only consistency has been inconsistency for the American auto industry during the first half of this decade, a trend that is expected to continue amid challenging market conditions in 2026.

The U.S. auto sector, a crucial driver of the economy estimated at about 4.8% of U.S. gross domestic product, has endured ongoing crises since the Covid-19 pandemic shuttered U.S. assembly plants in early 2020. The global health crisis was followed by years-long supply chain problems, semiconductor chip shortages, political back-and-forths, tariffs and other challenges to fully electric and autonomous vehicles.

Automakers have been surprisingly resilient in the face of challenges, but those problems are now being combined with more traditional industry problems of affordability and slowing consumer demand. All of that will create a more challenging environment for automakers in 2026.

“We have 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 we're in now.”

Other executives have expressed similar sentiments as they prepare for a “new” American auto industry: one that is more expensive, smaller and, in many ways, less predictable.

Automotive forecasters expect sales to be flat or lower this year, even though industry sales only reached 16.3 million units last year. That was the highest level since the 2020 pandemic, but down from more than 17 million for five straight 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 engine CEO Jim Farley said Jan. 13 during an event for the Detroit Auto Show. “That's really important.”

One of the industry's biggest problems, and one that is a culmination of many factors, is the affordability of new vehicles.

New vehicle prices have risen; The average transaction price was around $50,000 toward the end of last year, up 30% from less than $38,747 at the beginning of 2020, according to Cox Automotive.

Historically, average transaction prices increased an average of 3.2% year over year, but between 2020 and 2022 that average nearly tripled to 9%.

“The pandemic-induced production constraints and supply chain chaos not only temporarily disrupted the market. 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, senior director of economic and industry insights at Cox Automotive.

It's not just vehicle prices that affect consumers' pockets, either. They're also dealing with inflation, increases in maintenance and repairs, and average annual increases of 13% in insurance over the past five years, according to Cox Automotive.

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

Cox Automotive reports that in November 2019 it took 33.7 weeks of median household income to purchase the average new vehicle. It is now 36.3 weeks. That's down from a record 42.2 weeks during the pandemic, but it still means vehicles cost thousands of dollars more than historical levels.

David Christ, Toyota Motors The head of US sales warned that the current tariff and trade environment will cause prices to continue rising this year, despite concerns.

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

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

“Every automaker must face the reality that the U.S. market has changed for the foreseeable future,” said Lance Woelfer, head of American honda motors Sales in the United States.

For Honda, Woelfer said that means increasing production on less expensive versions, as well as focusing on certified pre-owned vehicles, which are used but backed by company warranties. For others, like Ford, that could include re-entering abandoned segments like 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 that we couldn't find a way to compete and be profitable. Well, maybe we'll find a way to do it.”

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

Ford's rivals in the city general motors and stellantis They have also largely abandoned the traditional U.S. sedan market.

Concerns about affordability are also generating attention from outside the auto industry. A Senate committee led by Sen. Ted Cruz, R-Texas, requested a hearing with the CEOs of Ford, GM and Stellantis on affordability and other issues in the auto industry. The hearing was scheduled for January 14, but was postponed amid scheduling conflicts and Ford's general opposition over tesla CEO Elon Musk did not attend the meeting, according to a letter from the company to the subcommittee obtained by Politico.

Automakers are also preparing this year for potentially volatile U.S. regulations and trade negotiations, such as the upcoming renegotiation of the U.S.-Mexico-Canada Agreement, 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 vehicle trade deals with those Asian countries, but not with their neighbors to the north and south.

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

“Looking ahead to 2026, our work on the cycle would suggest that autos would find it difficult to outperform given a relatively flat year-on-year volume outlook. However, we see reason for optimism in the US. [automakers]” UBS analyst Joseph Spak wrote in a note to investors last month.

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

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

GM's 2025 guidance included adjusted earnings before interest and taxes of between $12 billion and $13 billion, or adjusted earnings per share of $9.75 to $10.50, 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 face uncertain times.

“It's hard to see how 2026 could bring more external shocks and stock price divergence than 2025, but with no visible end to industry disruption, we're also primed for surprises, deteriorations and strategic shifts,” Jefferies analyst Owen Paterson said in a note to investors this month.