Perhaps no business needs certainty more than the auto industry. It usually takes at least four years to design a new model and bring it to market, requiring carmakers to divine what buyers will find appealing by the time the vehicles reach showrooms.
Yet industry veterans say they can’t remember a time when the biggest carmakers faced as much uncertainty as they do now. They have been whipsawed by tariffs. Chinese carmakers are breathing down their necks around the world. Self-driving taxi companies like Waymo are changing the very nature of transportation. Software has replaced horsepower as a key selling point. Sales are flat almost everywhere, and profits are declining.
How U.S. carmakers cope with this pivotal moment will determine whether they survive as global players or slide into irrelevance, becoming niche manufacturers of pickups and sport utility vehicles that only Americans buy.
The early indications are not promising. Many established U.S. and European carmakers have been stumped by electric vehicles at seemingly every turn. First, Tesla’s meteoric rise caught them unawares. They responded by investing in new factories but are now pulling back after the U.S. government repealed tax credits and other subsidies for those cars.
“The term ‘unprecedented’ is always overused. But it is really everything coming together at once,” said Stuart Taylor, a former Ford Motor executive who is chief product officer at Envorso, which advises carmakers on software.
U.S. carmakers, in particular, face some difficult choices.
President Trump has given them a short-term gain by dismantling clean air regulations and fuel economy standards, making it easier to sell pickups and sport utility vehicles that are very profitable.
Should they use that relief to please Wall Street and make as much money as possible? Or should they keep investing in new technologies?
Auto experts say old-line companies risk becoming obsolete if they don’t learn how to make appealing, profitable electric vehicles, which most executives expect to eventually replace cars that run on gasoline despite the Trump’s administration efforts to promote fossil fuels. Improvements in electric vehicle technology mean that, within a few years, they will be cheaper to buy and will charge in 15 minutes or less.
One of the biggest problems established manufacturers have is that many of the electric models they sell have fared poorly against cars from Tesla and other newer companies.
Tesla and Chinese carmakers like BYD have a substantial lead in battery technology and software. Established Western carmakers tend to lose money on electric vehicles and for the most part are also behind on self-driving cars. The Chinese have a head start there, too, as do Tesla and Waymo, a division of Google’s parent company that operates autonomous taxis in 10 U.S. cities and is expanding rapidly.
“It’s not impossible that in 10 years we wake up and see that we actually don’t have a domestic industry in the sense of something that does significant research and development,” said Susan Helper, a professor at Case Western Reserve University who was chief economist at the Commerce Department under President Barack Obama.
“Maybe Ford and G.M. exist as nameplates but the powertrains and their cars are all Chinese,” said Ms. Helper, who also advised President Joseph R. Biden Jr. on electric vehicles.
The health of the auto industry has huge economic implications. About three million Americans work for automobile and parts manufacturers and dealers. About eight times that many jobs at carwashes, advertising agencies, restaurants and other businesses depend on spending by carmakers, their employees or car owners.
Vehicle and parts makers shed about 21,000 U.S. jobs in the last year, according to the Bureau of Labor Statistics, despite tariffs designed to force them to manufacture domestically.
Automakers have been a leading source of industrial innovation since Henry Ford perfected the moving assembly line in the early 1900s. They are critical to the manufacturing revival that politicians say they want. Manufacturing techniques developed by automakers, such as use of robots, are widely copied by other industries.
The challenges facing automakers in the United States and Europe come after a tough year.
Ford, General Motors and Stellantis, the European-American company that owns Chrysler, Fiat, Jeep and Peugeot, reported multibillion-dollar losses at the end of 2025 as they delayed and canceled electric vehicle investments.
Even automakers that made money last year, like the German luxury brand Mercedes-Benz, made a lot less of it. Among major automakers, only Toyota of Japan managed a significant increase in sales during 2025. Analysts expect industrywide sales to be flat again in 2026. (Ford did report a 1 percent increase in sales for the year.)
Automakers say things are not as bad as they look. Many have cash reserves they built up during the pandemic, when shortages allowed them to raise car prices.
G.M. felt confident enough in its finances to spend $6 billion last year to buy back its own shares, a way of returning money to investors. The company has earmarked a similar amount for 2026.
“The balance sheet of G.M. has probably never been stronger,” Paul Jacobson, the company’s chief financial officer, said last month at a conference on the automobile industry organized by the Federal Reserve Bank of Chicago.
Ford also returned money to shareholders through dividends.
Such payouts generate good will on Wall Street and may help companies raise capital later, said John Paul MacDuffie, a professor at the University of Pennsylvania’s Wharton School. But he noted that the money could be better spent on new products and technology.
“I don’t know if I fully understand the strategic logic behind the stock buybacks,” Mr. MacDuffie said. He added that U.S. carmakers had advantages, including the ability to exploit innovations from Silicon Valley in ways that Chinese carmakers cannot.
Carmakers say they continue to invest in electric vehicles, batteries and self-driving cars, even if the pace has slowed. G.M. sells nine electric vehicles, including battery-powered versions of the Chevrolet Equinox, the Chevrolet Blazer and the Cadillac Escalade IQ.
“We continue to believe in E.V.s,” Mary T. Barra, G.M.’s chief executive, said during a conference call in January. The company is investing in battery technology and ways to manufacture electric vehicles profitably, executives say.
G.M., which stopped developing self-driving taxis in 2024 after an accident in San Francisco, plans, in 2028, to introduce a car so capable of driving itself that drivers will be able take their eyes off the road in some situations.
G.M. executives point out that the company’s loss of $3.3 billion for the fourth quarter of 2025 was smaller than its U.S. rivals. Ford lost $11.1 billion in the quarter.
Stellantis, which does not report quarterly figures, said Thursday that it lost $20.1 billion during the second half of the year. The results “reflect the cost of overestimating the pace of the energy transition and of the need to reset our business,” Antonio Filosa, the company’s chief executive, said in a statement Thursday.
Last year, Ford discontinued the electric F-150 Lightning pickup, but is planning to begin selling a midsize electric pickup next year for around $30,000. The truck will be able to travel 300 miles between charges. Ford sequestered the design and engineering team in California to insulate it from corporate meddling.
The pickup will address “the core of the market in our home market where there’s not a lot of competition,” Jim Farley, Ford’s chief executive, told investors and analysts last month. He added, “The real question that I ask myself is how will the Chinese change the game.”
Ford executives say they have not dialed back investment in electric vehicles, just redirected the money to products that are more likely to make a profit. In the future, the company plans to offer a new version of the Lightning that will run on battery power but also have a gasoline motor that can charge the battery when needed.
In Europe, Ford plans to cut costs by producing electric vehicles using technology developed by the French carmaker Renault.
Chinese companies like BYD, Geely and SAIC are effectively banned from the United States by tariffs. But they are taking market share from Ford in places like Asia, Australia and Europe. The Chinese probably can’t be kept out of U.S. showrooms forever. Mr. Trump has mused about letting them build factories in the United States.
Carmakers from China are often accused of unfair competition because they receive government subsidies. But there’s more to it than that, analysts say.
BYD sells vehicles in China for a lot less than Tesla, which also makes cars in that country, largely by doing things like making its own batteries and other components rather than buying them, according to the Rhodium Group, a research firm. Subsidies account for only a small portion of the difference in prices of BYD and Tesla cars.
The Chinese also move at astonishing speed — some companies from that country can develop new models in as little as 14 months, said Mark Wakefield, a managing director at the consulting firm AlixPartners who specializes in the auto industry.
The Chinese companies make decisions more quickly, use virtual simulations for testing and are willing to take risks that Western automakers might not, Mr. Wakefield said.
U.S. automakers realize that they need to become faster and more innovative, he said. But it’s not clear whether they can overhaul their organizations quickly enough.
“Some of the senior executives have a significant sense of urgency,” Mr. Wakefield said. “It’s just tough to translate that into revolutionary change.”
Jack Ewing covers the auto industry for The Times, with an emphasis on electric vehicles.
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