New vehicle sales to decline moderately in 2026 as affordability issues weigh, forecast says

Cox Automotive forecasts U.S. new-vehicle sales of 15.8 million in 2026, a 2.4% decline year-over-year, with retail sales down 1.5% and fleet sales falling 6.1%; used retail sales are expected to dip modestly and EV/plug-in hybrid lease penetration to drop three percentage points. The outlook attributes the slowdown to affordability pressures for lower-income buyers amid elevated costs and a weak labor market, offset in part by higher-income buyers benefiting from asset gains, potential interest-rate cuts and tax relief; policy uncertainty (tariffs, fuel-economy and tax-code changes) and an influx of off-lease EVs are cited as additional headwinds.

Analysis

Market structure: Cox’s 2026 15.8M sales (-2.4% YoY) and retail -1.5% / fleet -6.1% indicate demand softness concentrated among lower‑income buyers, while higher‑income households sustain luxury/new purchases. Winners: franchised used-car retailers (CarMax KMX, AutoNation AN) and luxury/residual-light brands; losers: lower‑margin mass OEM volumes, EV pure‑plays reliant on lease economics and residuals. Pricing power will bifurcate — premium OEMs hold ASPs, mainstream OEMs and EVs face trade‑down and margin pressure as consumers prioritize value.

Supply/demand & cross-asset: softer new and used retail growth implies rising off‑lease vehicle supply (especially EVs), downward pressure on used car and residual values, and weaker demand for battery metals (copper, lithium). That feeds into commodity downside (LIT/ALB risk), modestly disinflationary impulses supportive of IG credit and long-duration Treasuries if Fed eases H1 2026; USD may strengthen on risk aversion into policymakers’ uncertainty, tightening FX for commodity-linked currencies.

Risk assessment: Tail risks include abrupt tariff or tax changes (USMCA/tariffs) that raise input costs, a sharper labor market deterioration that collapses big-ticket demand, or a rapid flood of off‑lease EVs that collapses residuals. Immediate (days): price/volatility spikes on policy tweets; short (weeks–months): used‑car price correction and ABS spread widening; long (quarters): structural shift in EV adoption and supplier CAPEX reallocation. Hidden dependencies: captive finance health, residual value financing, and dealer inventory financing amplify losses if used values fall >10%.

Contrarian angles: The market underestimates upside for high-margin luxury and used-car specialists — expect AN/KMX to out‑perform by 200–500bp if trade‑down accelerates. EV downside may be partially priced but not for off‑lease deluge in 18–36 months; lithium miners (ALB) and index LIT look vulnerable. Policymaker clarity (Fed cuts + tax relief) in H1 2026 could reverse the selloff—monitor two catalysts (Fed chair appointments, USMCA outcomes) within 60–120 days.

Key Decisions for Investors

• Establish a 2.5% long position in AutoNation (AN) and a 2.0% long in CarMax (KMX) as a paired trade to capture trade‑down into used retail; target 12–18 month horizon, set tactical stop‑loss at -12% and take profits if outperformance vs XLF or auto ETF exceeds +300bps over 6 months.
• Initiate a 1.5% position buying 3–6 month put spreads on Rivian (RIVN) or Lucid (LCID) (e.g., buy 1 OTM put / sell deeper OTM put) sized to cost <0.25% portfolio each, to hedge EV residual/lease risks; roll or close if EV lease penetration stabilizes within +/-1pp over two consecutive monthly reads.
• Reduce/underweight lithium and battery metal exposure: trim ALB by ~2% and short 1% notional of LIT ETF (pairsize to risk) with a 6–12 month view, because softened new EV demand + off‑lease supply should pressure metal prices if EV penetration slows 2–4pp.
• Increase allocations to high‑quality short‑to‑intermediate auto ABS or IG corporate bonds by 2–3% (buy spreads vs Treasuries on ABS if spread >150bp) to capture yield while expecting modest disinflation/Fed easing in H1 2026; exit if ABS spreads widen >50bp from entry or unemployment rises >100bp.