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What Is the Auto Industry’s Biggest Problem?

The auto industry’s biggest challenge is managing a costly, uncertain transition without pricing out buyers or undermining company profitability.

By CarCody Team 4 min read
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The auto industry’s biggest problem is managing a costly, uncertain transition while keeping vehicles affordable and companies profitable. There is no universal ranking that makes one issue the biggest for every automaker, supplier, market, or buyer. Instead, affordability, investment, electrification, supply chains, and new technology are connected pressures: difficulty in one area can intensify the others.

Why there is no single industry-wide answer

The answer depends on whose problem you mean. A driver may feel the strain of vehicle prices and financing costs. A supplier may be worried about margins and changing product demand. An automaker may be weighing long-term investments against uncertain sales and different regulatory and market conditions across countries.

The available evidence points to a structural shift in how automotive value is created, not a universally accepted cross-market ranking of problems. PwC’s 2026 survey covered 720 senior automaker and Tier 1 supplier executives in 33 countries, with fieldwork in March and April 2026. Deloitte’s 2026 consumer study drew on more than 28,500 consumers in 27 markets. Those surveys offer broad perspectives, but neither means every company or buyer faces the same priorities.

Affordability puts pressure on demand

For consumers, a central problem is the cost of buying and financing a vehicle. Deloitte’s 2026 Global Automotive Consumer Study says rising vehicle prices and higher financing costs have brought affordability to the forefront. When a new vehicle is out of reach, buyers may delay replacing a car or consider a different type of vehicle, affecting the demand automakers and suppliers are planning around.

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PwC’s 2026 US Automotive Industry Outlook estimates that new-vehicle prices in the United States and Europe rose by an average of 15–25% since 2020, and that average transaction prices in those regions exceeded $45,000. These are regional, time-sensitive estimates—not a global price measure. PwC also says battery-electric vehicles in the US carried a 15–20% premium over the overall US market average transaction price in its 2026 outlook.

Profitability limits how much companies can invest

Automakers and suppliers must fund new products and capabilities while maintaining businesses that still depend on existing vehicles, technologies, and customers. If sales are uncertain or transition costs rise, it becomes harder to decide where and when to invest without weakening margins.

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The pressure is especially visible among European suppliers, though the figures should not be generalized to the entire global industry. In its Spring 2026 Pulse Check, CLEPA, the European automotive suppliers’ association, reported that 76% of surveyed suppliers expected profitability below 5% in 2026, including 24% expecting negative profitability. The same survey found that 73% had significantly adjusted product portfolios and 40% reported increasing exposure to non-automotive sectors.

CLEPA Secretary General Benjamin Krieger described the situation as “a profitability crisis that demands immediate, pragmatic action.” That is the association leader’s characterization of the conditions facing European suppliers, not a finding that every automotive business is in crisis.

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Electrification is a complex industrial transition

Electrification is not simply a matter of introducing electric models. Reaching scale depends on consumer demand, capital, manufacturing capacity, battery skills, competitive chemistries, dependable supplies of critical minerals, and energy costs. The International Energy Agency’s 2025 analysis, What Next for the Global Car Industry, emphasizes these challenges alongside national industrial competitiveness and policy choices.

Demand is not moving at the same pace everywhere. Deloitte’s 2026 consumer study reports regional variation in battery-electric vehicle interest and stronger interest in hybrids. Different national industrial strengths and transition strategies also shape what is practical for companies and governments. The result is a difficult planning problem: automakers need to develop vehicles and manufacturing capabilities years ahead, while market conditions can change sooner. The IEA notes that car model development takes years, making course correction difficult.

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Software and new competitors are changing the basis of competition

Vehicles increasingly compete through capabilities beyond mechanical engineering, including software, connected services, and AI. PwC’s 2026 executive survey identifies AI and software engineering as major capability gaps and says 46% of surveyed automotive executives expect significant competition from new entrants in adjacent industries.

That competition adds another investment challenge. Established automakers and suppliers must build or acquire capabilities while continuing to deliver vehicles and components. At the same time, consumers value connected safety and security features but remain concerned about data sharing, according to Deloitte’s 2026 study. Winning trust therefore matters alongside adding technology.

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How the pressures reinforce one another

  • Affordability affects demand: high purchase prices and financing costs can make buyers more cautious.
  • Demand uncertainty complicates investment: companies must commit to products, factories, skills, and supply chains before future sales are certain.
  • Transition costs press on margins: adapting portfolios and production can be difficult when profitability is already tight, particularly for the European suppliers surveyed by CLEPA.
  • Capability gaps raise competitive risk: companies that fall behind in software or AI may be less prepared for competition from adjacent industries.

That chain explains why the strongest answer is a connected transition problem rather than one isolated obstacle. It also explains why the experience differs by market and stakeholder: consumer demand, supplier margins, industrial policy, and technology readiness do not change in lockstep.

What this means for drivers

For consumers, the most tangible part of the industry’s challenge is balancing the vehicle they want with what they can afford. Deloitte’s 2026 study finds that consumer interest varies by region, hybrids attract stronger interest, and affordability is a prominent concern. It also reports that connected safety and security features matter to buyers, while data-sharing concerns and trust in vehicle servicing remain important considerations.

For the industry, the task is to respond to those preferences without assuming that every market is ready for the same powertrain, technology, or price point. The EPA’s 2025 Automotive Trends Report provides historical US context on fuel economy and vehicle technology since 1975; it is useful for understanding US trends, but it does not establish a global ranking of the industry’s biggest problem.

Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.

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