S&P Global Ratings has cut its global auto sales forecast, citing a “double whammy” of weakening China demand and rising energy costs, while forecasting softer U.S. vehicle sales.

The details: The revised forecast reflects softer demand in China and rising energy costs tied to the Middle East War, which are increasing variable expenses for automakers and suppliers, potentially weighing further on demand if prices remain elevated, according to S&P Global.

Why it matters: A weaker sales outlook and rising cost pressures could create a more challenging retail environment for dealers, particularly if affordability worsens and automakers respond with pricing adjustments or tighter incentives.

Softer demand could also intensify competition for fewer buyers.

Between the lines: Escalating commodity and logistics costs are adding pressure across the industry, according to S&P Global.

Zooming in: S&P Global also expects U.S. light vehicle sales to decline in 2026, even as larger vehicles gain share and EV sales continue to weaken.

What they’re saying: “Tough market conditions in China and U.S. tariffs have left a mark on the global auto industry,” the report states, adding, “…the auto industry remains on edge, as competitive pressures and high supply chain costs coincide with mounting inflation-driven demand risk.” 

Bottom line: S&P’s outlook points to a tougher road ahead for dealers, with affordability pressures, higher costs, and softer demand potentially creating a more competitive sales environment heading into 2026.