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

DETROIT — The only consistency has been inconsistency in the U.S. 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 critical driver of the economy estimated at 4.8% of U.S. GDP — has been plagued by sustained crises since the COVID-19 pandemic shuttered U.S. assembly plants in early 2020. The global health crisis has been followed by years-long supply chain issues, semiconductor chip shortages, political volatility, tariffs, and other challenges facing fully electric and autonomous vehicles.

Automakers have been surprisingly resilient through the challenges, but these issues are now combining with traditional industry problems of affordability and sluggish consumer demand. All of this creates a more challenging environment for automakers in 2026.

“We have to plan for the worst and hope for the best,” Randy Parker, CEO of Hyundai North America, told CNBC during an interview. “This is the situation we are 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.

Auto forecasters are calling for flat or declining sales this year, even though industry sales reached just 16.3 million units last year. This was the highest level since the pandemic in 2020, but is down from more than 17 million for five straight years before the global health crisis, according to industry data.

“Anyone who works in the auto industry…we all have to be very careful about consumer demand.” ford motor CEO Jim Farley said Jan. 13 during an event at the Detroit Auto Show. “This is really important.”

One of the industry’s biggest issues – and one that is the culmination of many factors – is the affordability of new vehicles.

New car prices increased; The average deal price was hovering around $50,000 at the end of last year, up 30% from less than $38,747 to start 2020, according to Cox Automotive.

Average transaction prices have historically increased by an average of 3.2% year over year, but from 2020 to 2022 that average has nearly tripled to 9%.

“The pandemic-induced production constraints and supply chain chaos not only temporarily disrupted the market,” said Erin Keating, senior director of economic and industry insights at Cox Automotive. “They fundamentally restructured the pricing dynamics. This high plateau is now the new baseline, which has the market anchored to these high price points.”

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

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

Cox Automotive reported that it took the average household income 33.7 weeks to buy an average new car in November 2019. Now it takes 36.3 weeks. That’s down from the record high of 42.2 weeks during the pandemic, but it still means vehicles cost thousands of dollars more than historical levels.

david christ, toyota motor The US sales chief warned that tariffs and the current trading environment will cause prices to continue to rise this year, despite concerns.

“For our part, we are taking it month by month, and we are monitoring competitors closely,” Crist said in a call with reporters earlier this month. “But we feel that prices will rise for us and for our competitors.”

To address the challenges of sluggish sales and affordability, Toyota and other automakers said they would refocus on lower-priced car models — a change from recent years when automakers prioritized their more expensive, more profitable vehicles during supply chain shortages.

“Every automaker must face the fact that the American market has changed for the foreseeable future,” said Lance Wolfer, president of the US division. Honda Motor US sales.

For Honda, Wolfer said that means increasing production on less expensive models as well as focusing on certified pre-owned cars, 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 haven’t been able to find a way to compete and make a profit. Well, maybe we’ll find a way to do that.”

Ford sells sedans outside the United States but exited the domestic market by canceling the Michigan-made Fusion in 2020. It also canceled the larger Taurus sedan, the smaller Ford Fiesta and the Ford Focus before that.

Ford Crosstown Competitors GM and Stellantis It has largely fallen out of the traditional American sedan market as well.

Affordability concerns are drawing interest from outside the auto industry as well. A Senate committee led by Sen. Ted Cruz, R-Texas, has requested a hearing with CEOs from Ford, General Motors 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 public pushback from Ford 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 bracing this year for potentially volatile U.S. trade regulations and negotiations, such as the upcoming renegotiation of the United States-Mexico-Canada Agreement scheduled for later this year.

Currently, automakers can import new cars from South Korea or Japan with lower tariffs than those imported from Canada or Mexico, depending on their content in the United States. The Trump administration reached trade agreements on vehicles with those Asian countries but not with their neighbors to the north and south.

Depending on the outcome of those discussions, the USMCA could serve as a tailwind for automakers that have a lot of production in the United States.

“Looking out to 2026, our work on the cycle suggests that autos will have a hard time outperforming given the relatively flat year-over-year volume outlook. However, we see reasons for optimism for the US. [automakers]“,” UBS analyst Joseph Spaak wrote last month in a note to investors.

Wall Street will start getting its first forecasts from automakers this week starting with GM reporting its fourth-quarter and year-end earnings on Tuesday, followed by an announcement of its fourth-quarter and year-end earnings. Tesla Wednesday.

GM CEO Mary Barra confirmed 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 $12 billion to $13 billion, or $9.75 to $10.50 per adjusted share, and adjusted auto 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 times of uncertainty.

“It is hard to imagine how 2026 could bring more external shocks and stock price variation than 2025, but with no clear end to the industry disruption, we are also prepared for surprises, impediments and strategic shifts,” Jefferies analyst Owen Patterson said in an investment note this month.