January 26, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Notta.

Hi, everyone. My name is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of Trends Talk. We at ITR, your apolitical and unbiased source of economic intelligence. And today I wanted to discuss the automotive market. It’s been quite a while since we chatted automotive, and I wanted to update you on our headline forecast that’s in the trends report for the automotive industry. And then I wanted to share some positives and maybe something to watch as it relates to this automotive segment.

So let me kick things off by first referencing, again, for those of you Trends Report subscribers, you’ll be familiar with this data set, that is North America Light Vehicle Production. It is a volume-based series where we’re looking at production in the US and in Canada and in Mexico as well. Now, as we look at North America light vehicle production, we are forecasting a positive year in 2026, which is a return to growth from finishing 2025 in that negative territory.

So I’ll kick things off with some good news for our automotive folks. In 2025, our forecast to finish out the year was 15.1 million units produced. That was a minus 3.1% growth rate. It was a tough year for the automotive industry in 2025. However, our forecast for 2026 shows an uptick to 15.5 million units, and that is a positive 3.2% growth rate for the full year of ’26 compared to 2025. So there is an uptick coming for our automotive friends.

As we look further down the line, we did make our ’27 and ’28 forecasts available. We have 0.6% growth in ’27 and 1.8% growth in 2028. So it’s a very slow, gradual climb for growth in the automotive industry. It’s still growth, but it might not be the growth that you’re used to in previous cycles. It is a more muted level of growth. So again, we’ll be finishing 2025 as we get that government data that always lags, as many of you know, coming in at 15.1 million units. By 2028, that number jumps to 15.9. Probably not the most exciting growth, but it’s still positive growth rates nonetheless.

Now, let me give you some good news before I share with you something to watch. The good news is we are seeing US Light Vehicle retail sales rising. That indicates that people are buying cars. It’s a positive sign for production demand. And we’ve also seen inventories move lower. And that’s coloring our thoughts that 2026, we’re going to get a little bit of lift from the production side. So it’s general rise in ’26, essentially flat, a plateau in ’27, and then very mild rise into 2028.

As our team looks at the automotive industry, we’ve got a great team of economists that put this forecast together, their primary focus, given the mildness of the rise over the next few years, was maintaining disciplined cost control. As I chatted with our team, that was the number one thing they put on my radar. They said, hey, listen, you know, rise will be modest and firms are really going to need to focus on protecting their margins amid the pricing pressure, the elevated input costs, and the financing costs. So that is the primary takeaway for those of you in the automotive industry.

Now, as I mentioned, I did want to give you all something to watch. And it’s something that I covered in my presentations throughout this last week, which is looking at the consumer side and looking at delinquency rates in particular. If there’s one thing that might make an economist like myself a little bit anxious, it’s noticing that the US auto loan delinquency rate over the past 90 days is sitting at about 5%. That is higher than what we would typically want to see out of a delinquency rate for the automotive industry. There’s two times really over the last 10 to 15 years where we’ve seen the delinquency rate climb that high. That was in 2020 following the pandemic, and that was in 2011. In 2020, we saw a 5% delinquency rate. In 2011, we saw a 5.1% delinquency rate. So if there’s anything that I will give you to watch in terms of a worry or a potential downside risk, as us economists like to call it, it is that those delinquency rates are rising and they are at a level that’s relatively high compared to what we’ve seen in recent history.

So again, if I sum this all up, the good news is we have light vehicle production growth over the next three years. The other piece of good news is that vehicle retail sales are rising. The challenge is the automotive industry is going to continue to face higher costs during this mild rise, and we need to keep our eyes closely on that automotive delinquency rate. We break down the automotive industry by region, by trucks, by passenger cars. There’s a lot of different ways we can splice this data. So please let us know how we can help. Again, head over to our Trends Report to see that North America light vehicle production forecast that I was referencing here.

We’ll check back in on the automotive industry as we get into the second quarter. But for now, I hope you found this information helpful. Thanks so much for joining me on this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you listen to your podcasts. And I look forward to seeing you all on the next one. Thanks so much. Take care for now.