U.S. President Donald Trump and Ford CEO Jim Farley applaud as President Trump visits Ford’s production center in Dearborn, Michigan, on January 13, 2026.
Evelyn HochsteinReuter
DETROIT — It was the only inconsistency for the U.S. auto industry in the first half of this decade, and that trend is expected to continue in 2026 amid challenging market conditions.
The U.S. auto sector, a key economic driver estimated to account for about 4.8% of the U.S. gross domestic product (GDP), has endured repeated crises since the coronavirus pandemic shuttered U.S. assembly plants in early 2020. The global health crisis was followed by years of supply chain issues, semiconductor chip shortages, political whiplash, tariffs, and other challenges to all-electric and self-driving cars.
Automakers have shown remarkable resilience under difficult circumstances, but these challenges are now combined with traditional industry issues of affordability and slowing consumer demand. As a result, 2026 will create an even more difficult environment for automakers.
“We have to plan for the worst and hope for the best,” Hyundai North America CEO Randy Parker said in an interview with CNBC. “That’s the situation we’re in right now.”
Other executives have expressed similar sentiments as they prepare for a “new” U.S. auto industry that is more expensive, smaller and in many ways more unpredictable.
Despite the auto industry’s sales reaching just 16.3 million vehicles last year, auto industry forecasters claim that this year’s sales will be steady or on the decline. That’s the highest level since the 2020 pandemic, but down from more than 17 million in five straight years before the global health crisis, according to industry data.
“For those in the auto industry…we should all pay close attention to consumer demand.” ford motor CEO Jim Farley said this on January 13th during an event at the Detroit Auto Show. “That’s really important.”
“Affordability Crisis”
One of the industry’s biggest issues, a combination of many factors, is the affordability of new cars.
New car prices have risen. The average transaction price hovered 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.
Average transaction prices have historically increased by an average of 3.2% year-over-year, but from 2020 to 2022, the average has nearly tripled to 9%.
“The production constraints and supply chain disruptions caused by the pandemic have not only temporarily disrupted the market, but have fundamentally reshaped pricing dynamics. This elevated plateau is now the new baseline, and the market is locked into these higher price points,” said Erin Keating, senior director of economic and industry insights at Cox Automotive.
Vehicle prices aren’t the only thing hitting consumers’ wallets. Cox Automotive says it’s also keeping pace with inflation, increased maintenance and repairs, and an average annual increase in premiums of 13% over the past five years.
“The cumulative weight of all these increases is pushing the total cost of vehicle ownership beyond the reach of 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 a median household income 33.7 weeks to buy the average new car; now it takes 36.3 weeks. While this is down from the all-time high of 42.2 weeks during the pandemic, it still means vehicle prices are thousands of dollars higher than historic levels.
david christ, toyota motor vehicle Despite concerns, U.S. sales executives warned that the current tariff and trade environment will continue to push prices higher this year.
“We’re taking things month by month and we’re watching our competitors very closely,” Christ said on a call with reporters earlier this month. “But we feel that prices will go up, both for us and for our competitors.”
To combat weak sales and affordability challenges, Toyota and other automakers have announced a renewed focus on lower-priced vehicle models. This is a change from recent years, when automakers prioritized the most expensive and profitable vehicles during supply chain shortages.
“All automakers must face the reality that the U.S. market is changing for the foreseeable future,” said Lance Wolfer, head of American. Honda Motor Co., Ltd. Sold in the US.
For Honda, that means increasing production of cheaper trims and focusing on certified pre-owned vehicles that are used but come with the company’s warranty, Wolfer said. For others, such as Ford, that could include re-entering abandoned segments such as sedans, according to the CEO.
“Never say never,” Farley told reporters during an event in Detroit. “The sedan market is very vibrant. It’s not that there isn’t a market there. We just haven’t found a way to compete and make a profit. Well, maybe we’ll find a way.”
Ford sells sedans outside the United States, but in 2020 it canceled the Michigan-made Fusion and withdrew from the domestic market. It also previously discontinued the large Taurus sedan and the smaller Ford Fiesta and Ford Focus.
Ford’s crosstown rival general motors and Stellantis It has also largely exited the traditional American sedan market.
Affordability concerns are drawing attention from outside the auto industry as well. A Senate committee led by Sen. Ted Cruz (R-Texas) has requested hearings with the CEOs of Ford, GM and Stellantis about affordability and other issues in the auto industry. The hearing was scheduled for January 14, but was postponed due to scheduling conflicts and general opposition from Ford. tesla CEO Elon Musk did not attend the meeting, according to a letter from the company to the subcommittee obtained by Politico.
The 2025 Jeep Grand Cherokee will be on display and for sale on Wednesday, January 7, 2026 at the Larry H. Miller Chrysler, Jeep, Dodge and Ram dealership in Thornton, Colorado.
Chang Hyun | Denver Post | Getty Images
“Be prepared for a surprise.”
This year, automakers are also bracing for potentially volatile U.S. regulatory and trade negotiations, including the renegotiation of the U.S.-Mexico-Canada Agreement expected later this year.
Currently, automakers can import new cars from South Korea and Japan with lower tariffs than from Canada or Mexico, depending on the U.S. requirements. The Trump administration reached auto trade deals with these Asian countries, but not with their neighbors to the north and south.
Depending on the outcome of these discussions, USMCA could provide a tailwind for automakers that produce a large amount of their vehicles in the United States.
“Looking to 2026, our cycle work suggests it will be difficult for autos to outperform given the relatively flat year-on-year sales outlook. However, we think there is reason for optimism for the US.” [automakers]” UBS analyst Joseph Spack wrote in a note to investors last month.
Wall Street will start getting the first guidance from automakers this week, starting with GM reporting its fourth-quarter and year-end results on Tuesday. tesla on wednesday.
GM CEO Mary Barra reaffirmed earlier this month that the company expects 2026 to be better than 2025.
GM’s 2025 guidance included adjusted earnings before interest and taxes of $12 billion to $13 billion, adjusted EPS of $9.75 to $10.50, and adjusted auto free cash flow of $10 billion to $11 billion, increasing from $7.5 billion to $10 billion.
But Wall Street analysts expect mixed results for the U.S. industry, which continues to grapple with uncertain times, depending on automakers.
“It’s hard to imagine how 2026 will bring more external shocks and stock price divergence than 2025, but with no end in sight to industry disruption, we’re bracing for surprises, impairments and strategic shifts,” Jefferies analyst Owen Patterson said in a note to investors this month.
