U.S. Auto Industry Faces Continued Headwinds and Affordability Crisis into 2026
The U.S. automotive industry is projected to continue experiencing inconsistent market conditions in 2026, building on challenges faced since early 2020. The sector, contributing an estimated 4.8% to the U.S. GDP, has contended with rolling crises, including the COVID-19 pandemic, subsequent supply chain disruptions, semiconductor shortages, political shifts, and tariffs impacting electric and autonomous vehicles.
Despite industry resilience, these issues are now compounded by rising vehicle affordability concerns and declining consumer demand. Automotive forecasters anticipate stable to lower sales this year, following 16.3 million units sold in 2025, which was an increase from the pandemic low but remained below pre-pandemic levels of over 17 million units annually.
New Vehicle Affordability: A Primary Concern
New vehicle affordability has become a primary concern. The average transaction price for a new vehicle approached $50,000 at the end of 2025, representing a 30% increase from under $38,747 in early 2020. Historically, average transaction prices increased by about 3.2% annually, but this rate nearly tripled between 2020 and 2022.
Cox Automotive senior director Erin Keating indicated that pandemic-related production constraints and supply chain issues fundamentally restructured pricing dynamics, establishing a new, higher baseline.
Cumulative Costs Impact Vehicle Ownership
Beyond vehicle purchase prices, consumers face increased costs for inflation, maintenance, repairs, and an average 13% annual rise in insurance premiums over the past five years. These cumulative increases have made vehicle ownership less accessible for many middle- and lower-income households.
In November 2019, purchasing an average new vehicle required 33.7 weeks of median household income, a figure that increased to 36.3 weeks more recently, though down from a pandemic peak of 42.2 weeks.
Toyota Motor's U.S. sales chief, David Christ, warned that current tariff and trade environments could lead to further price increases in 2026.
Industry Adapts to Shifting Demands
In response to slower sales and affordability challenges, automakers like Toyota and Honda plan to refocus on producing lower-priced vehicle models and increasing certified pre-owned vehicle offerings. Ford CEO Jim Farley stated the company might consider reentering segments like sedans, which it had previously exited in the U.S. market.
Congressional Scrutiny on Affordability
Separately, a U.S. Senate committee requested a hearing with CEOs from Ford, GM, and Stellantis regarding automotive affordability and related matters. The hearing, initially scheduled for January 14, was postponed.