The world’s new vehicle market: outlook for 2026 – Automotive World
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Automotive World examines new light vehicle and truck demand in 2025 and discusses the outlook for 2026. By Jonathan Storey
In 2023, following years marked by the COVID-19 pandemic and Russia’s invasion of Ukraine, all major regions registered rising LV demand. This contributed to a global increase of 11.7%, to 85.8 million units, just 7.9% shy of the industry’s 2017 peak. Global demand grew by a further 2.4% in 2024, led by rises of nearly 900,000 units in China and 700,000 units in North America.
This time last year, Automotive World anticipated a similar rate of growth for 2025, as forecast global economic growth was also similar to the 2024 level. While Donald Trump’s US election victory was known at the time, he had yet to take office, and the extent of his administration’s plans to shake-up long-established patterns and conventions of world trade was not known.
As this became clearer in the early months of 2025, particularly following the 2 April ‘Liberation Day’ tariff announcements, many forecasts were downgraded, but as the year’s end approaches, it’s fair to say the worst fears have not been realised. Many of the tariff impacts have been diluted or deferred by the actions of various players, including:
The global forecast for 2026, set out below by region, is finely balanced, with overall demand essentially expected to remain at the 2025 level.
Asia remains the world’s largest sales region by a substantial margin, with 2025 sales expected to rise by 3.6% to 43.6 million units, up from 42.1 million in 2024. The forecast for 2026 is for demand to fall by less than 1%, as a 2-3% fall in China is mostly offset by increases elsewhere.
China’s recovery from 2018-19 market downturn was delayed by the COVID-19 pandemic, but demand finally rose in 2023 and 2024. It is set for a third year of growth in 2025, with an anticipated 3.9% rise taking it to the highest level since its 2017 peak of 27.1 million units.
The forecast for 2026 is a decline of 2-3% as demand is weakened by the reduction of incentives, specifically:
The negative effects of such changes should be partially offset by a reasonably robust economic performance, as China has shown itself less vulnerable to US tariffs than many had expected. Tough competition between the domestic producers should also continue to exert downward pressure on prices.
Japanese LV demand between 2020 and 2022 was suppressed by the pandemic and the global chip shortage. However, the market then grew strongly during 2023, ultimately growing 14.1% year-on-year at 4.7 million units. The rate of growth was expected to slow but remain positive in 2024, yet the forecast was up-ended by a series of vehicle certification scandals which caused a 7.1% decline.
As expected, a partial recovery has occurred during 2025, but an anticipated full-year rise of 4.5% will see the market remain well below its pre-pandemic levels of 5.0-5.2 million units. Further modest growth is anticipated for 2026, with consumer confidence recently reaching its highest level since April 2024, and domestic consumption expanding for three successive quarters. Higher interest rates will constrain the rise, and if current tensions with China worsen, this too could weaken demand.
India’s LV market overtook Japan’s in 2024 and is set to widen the gap in 2025, with a fifth successive increase (at 6.7%) taking the market to a new peak of 4.8 million units. The Indian economy has again outperformed all major economies, with GDP growth for 2025 projected at 6.6%, dipping to a still-robust 6.2% in 2026.
Long term, the growing middle-class is expected to keep India’s LV market on a rising trend, and the near-term outlook for 2026 is positive, helped in general by the positive economic background and recent cuts in the Goods and Services Tax on small cars.
The North American (Canada, Mexico, and the US) LV market has yet to regain the level of 20-21 million units at which it sat in the five years pre-pandemic. However, 2025 is set to be the third successive year of growth, with a 2.2% rise taking demand to nearly 19.8 million units.
Going into 2026, Automotive World forecasts small downturns in US and Canadian demand, partly offset by a small increase in Mexico. The key headwinds are expected to be:
On the positive side, further interest rate cuts are expected, and the interest on loans for personal-use new cars will be tax deductible for 2025-2028 under the ‘One Big Beautiful Bill Act’. The maximum annual deduction is US$10,000, phasing out for higher income earners, and final assembly of the vehicle must have occurred in the US. Cox Automotive suggests that if the average car owner pays US$2,000 in interest over a year, they could save about US$400 on their taxes—not a level of saving that’s expected to have a major impact on demand, and one that will in any case diminish as interest rates fall.
If demand does look as weak or weaker than forecast, measures by the Trump Administration to boost the sector cannot be ruled out.
LV demand across Europe is expected to rise for the third successive year in 2025, but the forecast 1.4% increase to nearly 15.2 million units still leaves the market well below its pre-pandemic level, which averaged 17.3 million units over the five years to 2019.
Economic growth in the region remains positive but lacklustre, and more of the same is expected in 2026. Consumer confidence in the EU recently reached an eight-month high but remains below the long-term average. Against this background, the outlook for LV demand in 2026 is growth at a similar level to 2025.
Demand in the region grew by 12.6% in 2021, 7.1% in 2022 and 12.7% in 2023, when demand exceeded four million units for the first time. A 2.5% fall occurred in 2024, led by a decline in Iran which, until 2023, was usually the regional leader.
Although Iran is expected to see a further decline in 2025, a forecast double-digit rise in Turkey and 5% rise in Saudi Arabia helped the regional figure to increase by a forecast 4.2%. Further growth is anticipated for 2026, supported by an increase in the expected rate of economic growth across the Middle East.
Markets like Argentina, Chile and Brazil have experienced various states of decline since 2019, with a slight recovery from the pandemic in 2021 to 3.65 million units. Regional demand was little changed in 2022 but rose by 4% in 2023 and then 7.4% in 2024.
A stronger 7.8% rise is forecast for 2025, helped particularly by a near-40% increase in Argentina. Slower but still positive growth is forecast for 2026, taking the market within a whisker of its pre-pandemic peak of 4.6 million units.
The COVID-19 pandemic caused Russia’s LV market to drop 9.1% to around 1.6 million units in 2020. A partial recovery of 4.3% occurred the following year, and an acceleration of the recovery was expected in 2022. However, the shock of Russia’s invasion of Ukraine entirely disrupted that forecast, and demand fell by 59% to 687,000 units—its lowest level for at least 30 years. Many foreign-owned brands have withdrawn from the market, and component shortages cut the output of domestic brands.
In 2023, Russia’s market rose by 54% as the remaining carmakers, particularly Avtovaz, increased output having arranged alternative supply structures. Similar growth of 48% occurred in 2024, but this volatile market is heading for a fall of around 20% in 2025, reflecting higher interest rates, higher prices, reduced consumer purchasing power and other issues. Similar headwinds are expected to cause a further fall in 2026.
African demand rose between 2021 and 2023 but dropped in 2024. Automotive World expects it to return to growth in both 2025 and 2026.
In 2023, a return to double-digit growth took global demand for 6t-plus trucks to 2.9 million units, close to the average for the previous ten years. The following year, the market fell by 3%, reflecting declines in most major regions except South America, and it is heading for further decline in 2025 as the downturns in Europe (West and East) and North America deepen and one in South America begins. A mild recovery is forecast for 2026, much of it in the second half.
Demand has rebounded during 2025 and is expected to end up 7.9% YoY at 760,000 units, with trade-in incentives for diesel and natural gas models helping the recovery. Over the first nine months of the year, diesel-fuelled trucks only represented about half the trucks sold, with the other half split fairly evenly between natural gas and battery-electric models. The market is expected to plateau at this elevated level in 2026, though the share of battery-electric models will increase further.
It should be noted that the basis of Chinese data has changed. Previously, the sales data included exports, but these have been excluded from 2022 onwards. Insufficient detail is available to adjust the prior years, when the inclusion of exports inflated the sales data significantly. Exports from China have grown strongly in the past few years, with heavy truck exports reaching 295,000 units in 2024 and expected to exceed 300,000 in 2025.
Following 38% growth in 2022, demand in 2023 rose by 9.4% to 383,700 units. As expected, demand was lower in 2024, as some operators awaited the outcome of the Indian election before committing to new truck purchases. Demand was then hit by a longer than usual monsoon period, which affected both infrastructure projects and mining.
2025 is expected to show signs of recovery, helped by those infrastructure projects, a scrappage policy and stable replacement demand. Further growth is forecast in 2026, supported by robust economic growth and improved financing conditions following four interest rate reductions by the central bank during 2025.
The pandemic caused North American truck demand to fall at twice the forecast rate in 2020, down 23% to 478,000 units, with Class 8 sales—typically more volatile—dropping by 31%. The recovery began in 2021 with a 17.2% rise to 560,000 units followed by rises of 7.1% in 2022 and 3.3% in 2023, both figures in line with forecasts. An 11% fall in 2024 reflected satisfaction of pent-up demand and substantial renewal of the parc, and a similar situation is likely to materialise in 2025, with the market heading for a 12-13% fall.
A mild recovery is expected to begin in 2026, with demand picking up in the second half of the year. The replacement of vehicles as truck fleets age should generate this sales growth, rather than any significant expansion of capacity by hauliers. A previously anticipated pre-buy effect in the US, in response to 2027 emission regulation changes, has been delayed by legal challenges and political pushback, which the Environmental Protection Agency is currently re-evaluating.
Europe’s anticipated recovery in 2022 was weakened by plunging sales in Russia, meaning regional figures didn’t change overall despite improvements in the West. The following year, sales in Europe grew by 27%, boosted by higher deliveries across all the major markets, including a sharp recovery in Russia. However, Automotive World expected a cyclical downturn to start in 2024, which subsequently occurred, and full-year sales dropped by 6.2%.
A further decline was forecast for 2025, and full-year demand is heading for an 11% drop. A recovery is expected to begin in the latter half of 2026, leading to a small increase over the year. Looking further ahead, a pre-buy effect is anticipated to boost demand in 2028, in advance of Euro 7 emission standards applying to all new trucks from May 2029. The pre-buy boost will typically be followed a post-buy decline in 2029.
After the region’s GDP fell 6.2% in 2020 and truck demand dropped 16.7%, the market recovered in 2021 only to fall again in the two years to 2023. A 7.5% rise in 2024 was expected to be followed by an 8.5% drop in 2025, but it now looks as though the 2025 decline will be a little milder at slightly less than 6%. Automotive World expects further decline in 2026.
In its October 2024 ‘World Economic Outlook (WEO)’ report, the IMF forecasted 3.2% growth for the global economy in 2025 and 1.8% for the subset of what it terms the ‘advanced economies’.
A year on, the organisation’s October 2025 WEO report expects rises of 3.2% and 1.6% respectively, which makes the year-ago outlook look pretty good. However, both forecasts were lowered mainly in response to the upheaval in international trade and politics caused by the Trump Administration’s many tariff announcements and changes. The IMF subsequently raised its forecasts again, as it became clear that the impacts from the upheaval would be less than feared or at least take longer to play out.
At a global level, the outlook for 2026 is for a 0.1pts drop in GDP growth to 3.1%, mainly reflecting weaker growth rates in China, India and Brazil. The headline for the 2025 WEO is “Global Economy in Flux, Prospects Remain Dim”. The organisation goes on to say that: ” […] trade tensions continue to cast a shadow over the global economy, with trade policy uncertainty remaining high. The effect of these tensions could well increase over time as firms gradually pass the tariffs on to customers as trade is rerouted more permanently and the global economy gradually becomes less efficient. Past experience suggests that it may take a long time before the full picture emerges.”
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