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

DETROIT — The only consistency for the U.S. auto industry in the first half of this decade has been inconsistency; This trend is expected to continue in challenging market conditions in 2026.

The U.S. auto industry—a major driver of the economy estimated at approx. 4.8% of America gross domestic product – Since the closure of assembly plants in the USA in early 2020, it has been subject to constant crises due to the Covid-19 pandemic. The global health crisis was followed by years of supply chain issues, semiconductor chip shortages, political pressures, tariffs and other challenges to fully electric and autonomous vehicles.

Automakers have been surprisingly resilient in the face of challenges, but these problems are now compounded by more traditional industry problems of affordability and slowing 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,” Hyundai North America CEO Randy Parker told CNBC during an interview. “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: more expensive, smaller, and in many ways less predictable.

Automotive forecasters are calling for a steady decline in sales this year, despite industry sales reaching just 16.3 million units last year. This was the highest level since the pandemic in 2020, but was below that level of more than 17 million in five consecutive years before the global health crisis, according to industry data.

“Everyone in the auto industry… we have to be very careful about consumer demand.” Ford Motor CEO Jim Farley said during an event at the Detroit Auto Show on Jan. 13. “This is really important.”

New vehicle prices have increased; The average transaction price was hovering around $50,000, up 30% towards the end of last year, from below $38,747 at the beginning of 2020. According to Cox Automotive.

Average transaction prices have historically increased by an average of 3.2% on an annual basis, but between 2020 and 2022, this average almost tripled to 9%.

“The production constraints and supply chain chaos caused by the pandemic didn’t just temporarily disrupt the market. They fundamentally restructured pricing dynamics. This elevated plateau is now the new baseline where the market is anchored to these higher price points,” said Erin Keating, senior director of economics and industry insights at Cox Automotive.

It’s not just vehicle prices that affect consumers’ wallets. They are also dealing with inflation, maintenance and repair increases, and average annual increases of 13% for insurance over the past five years, according to Cox Automotive.

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

Cox Automotive reported that it took the average household income 33.7 weeks to purchase a new vehicle in November 2019. Now this period is 36.3 weeks. That’s down from a record high of 42.2 weeks during the pandemic, but still means vehicles are thousands of dollars more expensive than historic levels.

David is the Messiah, Toyota Motor Despite concerns, the current tariff and trade environment will cause prices to continue rising this year, the US sales chief warned.

“From our perspective, we’re just taking it month by month and watching competitors closely,” Christ said in a phone call with reporters earlier this month. “But we think prices will increase for us and our competitors.”

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

“Every automaker must confront the fact that the American market is changing for the foreseeable future,” said United States President Lance Woelfer. Honda Motor US sales.

For Honda, that means increasing production on cheaper trims as well as focusing on certified pre-owned vehicles that are used but backed by company warranties, Woelfer said. For others, like Ford, that could involve re-entering abandoned segments like sedans, according to the 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. We just haven’t found a way to compete and be profitable. Well, we can find a way to do it.”

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

Ford’s intercity rivals General Engines And Stellantis They have also largely exited the traditional US sedan market.

Affordability concerns are also gaining attention from outside the automotive industry. A Senate committee led by Sen. Ted Cruz, R-Texas, requested a hearing with CEOs from Ford, GM and Stellantis on affordability and other issues in the auto industry. Hearing scheduled for January 14 but it was postponed amid scheduling conflicts and general pushback from Ford Tesla’s CEO Elon Musk is not attending the meeting, according to a letter sent from the company to the subcommittee. Obtained by Politico.

Automakers are also bracing for potentially volatile U.S. regulations and trade negotiations this year. An upcoming renegotiation of the United States-Mexico-Canada Agreement is scheduled for later this year.