Global auto industry off to muted start in 2026 amid macro headwinds, supply disruptions: Report

Global passenger vehicle (PV) sales rose about 4.5 per cent year-on-year in calendar year 2025.

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The global automobile industry is grappling with multiple structural challenges, including tariff pressures, high raw material costs and supply chain disruptions, with shortages of memory chips emerging as the latest hurdle impacting vehicle production, noted a report by Elara Securities on Monday.It stated that alongside supply-side challenges, macroeconomic factors are weighing on global vehicle demand, resulting in a muted start to calendar year 2026 (CY26) despite moderate growth recorded last year.Global passenger vehicle (PV) sales rose about 4.5 per cent year-on-year in calendar year 2025. Among major markets, China recorded the strongest growth at 9.1 per cent, while the United States and Europe posted modest gains of 1.9 per cent and 0.5 per cent, respectively.However, provisional data for January 2026 indicates a slowdown in demand, with global PV sales declining 1.2 per cent. Sales dropped across major markets, including China, the United States and Europe, which recorded declines of 6.8 per cent, 0.8 per cent and 3.9 per cent, respectively.

The decline in China was largely attributed to the withdrawal of subsidies that had earlier driven strong pre-buying activity in the fourth quarter of 2025. As a result, the share of new energy vehicles (NEVs) fell to 40.3 per cent in January from 52.3 per cent in December 2025.

In the United States, vehicle sales were affected by rising prices and affordability concerns. The report also pointed out that the expiry of the $7,500 federal electric vehicle tax credit has added further pressure on demand.

Several global original equipment manufacturers (OEMs) have indicated cautious outlooks for 2026. Automakers expect flat to marginal growth in the US and Europe, while the Chinese market remains challenging.

For instance, Mercedes-Benz has projected global sales growth of -2 per cent to +2 per cent.

The report also highlighted rising EV-related write-offs as automakers recalibrate their electrification strategies amid changing market conditions.

However, the outlook for the commercial vehicle segment appears stronger. Volvo Group has upgraded its demand forecast for Class 8 trucks, projecting growth of 2.9 per cent in Europe and 2.7 per cent in the United States for CY26.