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US Auto Sales Forecasted for Prolonged Downturn Through 2026

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  //automotive-transportation.news-articles.net/co .. ecasted-for-prolonged-downturn-through-2026.html
  Published in Automotive and Transportation on Tuesday, December 30th 2025 at 15:09 GMT by Seeking Alpha

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US Auto Sales Facing a Prolonged Downturn: S&P Forecasts Continued Struggles Through 2026

A new forecast from Standard & Poor’s (S&P) Global Mobility paints a sobering picture for the U.S. auto market, predicting continued declines in sales through at least 2026. The report highlights a confluence of factors – persistent affordability challenges, a slowing transition to electric vehicles (EVs), and shifting consumer preferences – that are contributing to this prolonged downturn. While some initially hoped for a quicker rebound after pandemic-related supply chain disruptions, S&P’s analysis suggests the recovery will be significantly more protracted than previously anticipated.

The Numbers: A Steady Decline

S&P now projects U.S. light vehicle sales to reach 13.7 million units in 2024, a slight downward revision from earlier estimates. More concerning is the forecast for 2025 (13.5 million) and 2026 (13.3 million). This represents a significant departure from pre-pandemic sales levels of around 17 million annually. The report emphasizes that these figures are based on conservative assumptions, and further economic shocks could exacerbate the situation. The article points out that this downward trend isn't unique to the US; global auto sales are also facing headwinds, though the U.S. market is experiencing particularly acute pressure.

Affordability: The Biggest Roadblock

At the heart of S&P’s pessimistic outlook lies the issue of affordability. The average new vehicle price remains stubbornly high, hovering around $48,000 according to Kelley Blue Book data cited in the article and corroborated by other industry sources. This is driven by several factors: ongoing supply chain complexities (though easing, they haven't fully resolved), increased material costs, and a shift towards more expensive vehicles like SUVs and trucks which dominate current consumer demand.

Crucially, interest rates are also playing a major role. The Federal Reserve’s aggressive rate hikes to combat inflation have significantly increased the cost of auto loans. A higher interest rate translates directly into higher monthly payments for consumers, making vehicle ownership less accessible. S&P notes that even with potential future rate cuts, the impact on affordability will be limited as lenders remain cautious and dealers are reluctant to offer deep discounts in a constrained supply environment. The article references data showing how rising rates have dramatically increased the total cost of financing a car, effectively adding thousands of dollars to the overall purchase price.

The EV Slowdown: A Shift in Momentum

While the transition to electric vehicles was initially expected to be a major driver of sales growth, S&P’s forecast indicates that this momentum has slowed considerably. Consumer enthusiasm for EVs remains tempered by concerns about range anxiety, charging infrastructure limitations, and, again, affordability. The high upfront cost of EVs, despite government incentives, continues to deter many potential buyers.

The article highlights a crucial shift in the EV landscape: automakers are now scaling back their production targets and delaying planned investments in new EV models. This recalibration reflects a more realistic assessment of consumer demand and a recognition that the transition to electric vehicles will take longer than initially predicted. Tesla, once the undisputed leader in the EV market, has also adjusted its pricing strategy, offering discounts to stimulate sales – a clear indication of softening demand. Ford's recent announcement of slowing down its EV production plans further underscores this trend (as reported by Reuters and linked within the Seeking Alpha article).

Beyond Affordability & EVs: Other Contributing Factors

S&P’s analysis doesn’t solely focus on affordability and EVs. Several other factors are contributing to the challenging market conditions:

• Changing Consumer Preferences: While SUVs and trucks remain popular, there's a growing interest in smaller, more fuel-efficient vehicles – a trend that automakers haven't fully addressed with their current product lineups.
• Shift to Longer Vehicle Ownership Cycles: Consumers are holding onto their existing vehicles for longer periods, reducing the need to purchase new ones. This is partly due to economic uncertainty and the high cost of replacing older cars.
• Dealer Inventory Challenges: While inventory levels have improved from the lows experienced during the pandemic, they remain below pre-pandemic levels, limiting consumer choice and potentially impacting sales volume.
• Economic Uncertainty: Broader macroeconomic concerns, including inflation and potential recessionary pressures, are also weighing on consumer confidence and willingness to make large purchases like vehicles.

Implications for Automakers & Suppliers

The S&P forecast has significant implications for automakers and their suppliers. Reduced sales volumes will likely lead to lower production rates, impacting profitability and potentially triggering job cuts. Automakers may need to adjust their investment strategies, focusing on more affordable vehicle models and exploring alternative powertrain technologies beyond battery electric vehicles (such as hybrids). Suppliers face similar challenges, needing to adapt to reduced demand and potentially consolidate operations.

Looking Ahead: A Long Road to Recovery

S&P’s forecast suggests that the U.S. auto market is in for a prolonged period of adjustment. While some improvements are expected over time – particularly if interest rates decline and supply chain issues fully resolve – a return to pre-pandemic sales levels appears unlikely in the near future. The industry will need to navigate significant challenges related to affordability, EV adoption, and evolving consumer preferences to regain momentum and drive sustainable growth. The article concludes that automakers must prioritize value and address consumer concerns about cost and practicality if they hope to weather this extended downturn.