Auto Industry Confidence Hits All-Time High, but Tariffs, Affordability, and China's Market Pose Top Risks

Confidence among global automotive executives in the industry's outlook has climbed to the highest level since the launch of the Automotive News Auto Industry Confidence Index — a benchmark launched in summer 2025, with this being its fifth quarterly release. While overall sentiment has improved markedly, executives consistently cite three core challenges: uncertainty around tariff policies, weakening consumer affordability, and the accelerating global expansion of Chinese automakers.

Index Rises to 58.5 — All Four Segments Cross Neutral Threshold for First Time

The composite confidence index reached 58.5 this quarter — up 2.9 points from Q1. The index uses a 0–100 scale, with 50 as the neutral threshold; scores above 50 indicate net optimism. Notably, all four segments — automakers, Tier 1/Tier 2 suppliers, franchised dealers, and finance — recorded six-month outlook scores above 50 for the first time in a single quarter. In Q1, only the finance segment cleared that threshold.

"The industry continues to grapple with numerous complex issues, yet consensus-level optimism about the future direction has strengthened," said Jeff Schuster, Global Automotive Market Insights Director at Mobility Global (formerly of S&P Global Mobility). "Retail sales performance in Q2 was relatively robust — exceeding earlier expectations — and signals that industry stability may be stronger than previously assumed."

Automakers: Demand & Gross Margins Support Near-Term Outlook, But Long-Term Pricing Power Remains Uncertain

The automaker segment scored 57.3 — up 2.7 points quarter-on-quarter but still the lowest among the four segments, and slightly below last year's 57.6. Respondents broadly acknowledged current strengths — including retail demand, vehicle gross margins, and capacity utilization — but expressed concern over their ability to sustain pricing power over the medium to long term.

Notably, the Chinese market was repeatedly cited as the top external risk. "I believe the greatest threat to the U.S. auto industry is Chinese automakers entering our domestic market — they've already dominated multiple other markets," stated one automaker executive. Other frequently mentioned concerns included "regulatory and tariff policy uncertainty" and "how long high oil and gas prices will persist — and their impact."

Suppliers & Dealers: Sentiment Improves, Yet Pressures Persist

The supplier segment index rose to 57.9 — up 3.4 points sequentially and 6.6 points year-on-year — reflecting a clear recovery in supply-chain sentiment. Order backlogs and customer demand volumes were key bright spots. However, rising input costs driven by raw materials, logistics, and tariffs — as well as financial resilience across their own supplier base — remain recurring concerns.

The franchised dealer segment index climbed to 59.5, up 4 points year-on-year. This optimism stems largely from improved profitability in finance and insurance services, and after-sales service — roughly 75% of respondents rated these areas as "excellent" or "good." Still, pressures persist: shrinking new-vehicle gross margins, low inventory levels, staffing shortages, and consumers delaying major purchase decisions. "Ordinary households lack disposable income and are actively avoiding large expenditures," noted one dealer.