GM and Hyundai report lower fourth-quarter sales and industry analysts predict a downturn for 2026
New car sales in the US are projected to decline in 2026 for the first time in four years, as a growing affordability crunch forces many lower-income buyers out of the market.
According to car services and data group Cox Automotive, sales are likely to fall from 16.3mn units in 2025 to 15.8mn units this year, while fellow forecaster Edmunds predicts a more modest year-on-year decline from 16.3mn to 16mn units amid sharply slowing demand for electric vehicles and signs of dwindling consumer confidence.
Sales figures released this week presented a mixed picture of demand in the final quarter of 2025, with Ford’s fourth-quarter US sales up 2.7 per cent on the previous year, while General Motors reported a fall of 7 per cent and Hyundai a fall of 1 per cent over the same timeframe.
Executives have cautioned that companies are likely to struggle to shield consumers from rising costs, stemming from the Trump administration’s tariff policies and withdrawal last year of a $7,500 tax credit for electric vehicle purchases.
Hyundai chair Chung Eui-sun used his New Year’s message to warn that “this will be the year when the crisis factors we have long worried about become reality”. David Christ, Toyota’s head of US car sales, said this week that “prices are going to go up for us and for our competitors”.
The warnings came after the US auto market rode out a year of turbulence in 2025 to post its best year in sales since 2019.
Customers rushing to purchase vehicles ahead of the tariff rises and elimination of the EV subsidy boosted sales in the first three quarters of the year. Meanwhile, the effort by automakers to shield consumers from tariff-related cost increases helped the market reach full-year sales of 16.3mn units in 2025, up from 16mn units in 2024, according to Cox.
Beneath the top-line sales figures, however, analysts described an increasingly bifurcated “K-shaped” dynamic where traditional purchasers of lower-end models have been priced out of a market jolted by a series of price shocks dating back to the coronavirus pandemic.
Erin Keating, executive analyst at Cox Automotive, noted that the average price for new vehicles in the US surged by 9.3 per cent a year on average between November 2020 and November 2022 as carmakers wrestled with acute shortages and supply chain disruptions, compared with an average annual rise of 3.2 per cent the previous eight years.
The annual rise has slowed to 1 per cent a year since then but has not come back down towards pre-pandemic levels, while lower-income consumers have also been hit by steep increases in other car-related costs.
Maintenance and repair expenses have risen at an average annual rate of 8.7 per cent and auto insurance by 13 per cent over the past five years, compared with an average consumer price index rise of 5 per cent over the same period.
With automakers having pivoted decisively over the past two decades away from more affordable compact and subcompact models, that has left many priced out of the new car market completely.
“The people who can still afford new vehicles are buying what they want, larger premium vehicles,” said Keating. “Everyone else, they didn’t downgrade to a compact car — they left the new market entirely, buying either used or hanging on to what they’ve got.”
Jessica Caldwell, head of insights at Edmunds, said automakers faced a dilemma: pivot back to producing smaller vehicles for lower-income consumers, or concentrate on producing larger and better equipped high-margin models for wealthier consumers unperturbed by the price rises.
Carmakers have largely resisted imposing tariff-related costs on customers in the form of higher sticker prices. But they are seeking other ways to pass on costs, including by boosting delivery fees and reintroducing more humble trim and equipment options.
Caldwell said several factors were also likely to prop up demand in 2026, including falling interest rates that could ease pressure on monthly payments and a return to the market of about 400,000 customers whose leases are due to expire.
Tyson Jominy, senior vice-president for data and analytics at consultancy JD Power, argued there was still “room in the system” to boost sales by offering more generous incentives while also increasing fleet sales to commercial customers.
But he acknowledged that would further squeeze margins already under strain. “They can’t just wave a wand and reduce prices. The challenge is to find a way to do it profitably.”
