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Episode #1222: Today we break down Cox Automotive’s 2026 forecast and why fragmentation is becoming the industry’s defining theme. We also cover California regulators taking aim at Tesla’s Autopilot language.
Show Notes with links:
- Cox Automotive says the auto industry beat expectations in 2025, but 2026 will be shaped by fragmentation everywhere—from consumers and labor to policy, EVs, and AI. The result is softer volumes, tighter margins, and a market that rewards precision over optimism.
- The 5 big forces at play: A bifurcated consumer trading down, a stagnant job market, inflation easing but Fed uncertainty lingering, shifting policy and an EV incentive cliff, and AI hitting an operational inflection point—all pulling the market in different directions.
- New-vehicle volumes reset lower: Cox forecasts 15.8 million SAAR in 2026, down 2.4% YoY, signaling the high-15 million range as the new normal rather than a temporary dip.
- Retail, fleet, and leasing cool: New retail sales fall about 1.5%, fleet declines more sharply, and lease penetration drops toward 21%, the lowest level in three years as EV tax credits and leasing loopholes disappear.
- Used remains the pressure valve: Total used sales dip roughly 1%, but tight retail inventory and affordability concerns keep demand steady, pushing more shoppers toward lower-priced vehicles.
- Wholesale values normalize: Cox expects the Manheim Used Vehicle Value Index to rise 2% by the end of 2026, pointing to normal depreciation—with growing EV volume adding pricing complexity.
- California regulators ruled Tesla misled consumers with its “Autopilot” and “Full Self-Driving” marketing, giving the automaker 90 days to fix its language. The case briefly threatened Tesla’s ability to sell cars in the state, but stops short of halting production.
- The DMV ordered a 30-day suspension of Tesla’s dealer license, which would prevent Tesla from selling vehicles directly to consumers in California if it goes into effect.
- That dealer suspension is stayed for 90 days, meaning Tesla can keep selling cars as long as it updates its advertising and disclosures within that window.
- A separate manufacturing license suspension—which could have affected Tesla’s ability to build vehicles in California—was permanently stayed and will not take effect.
- Regulators say Tesla’s use of “Autopilot” and “Full Self-Driving Capability” implied autonomy that doesn’t exist, creating unsafe assumptions for drivers.
- Tesla pushed back strongly, saying no consumer complained and stating, “Tesla has never misled consumers.”
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