New Delhi

The global automobile industry is facing multiple structural challenges, including tariff pressures, rising raw material costs and continuing supply chain disruptions, according to a report by Elara Securities.

The report said shortages of memory chips have emerged as the latest issue affecting vehicle production across the industry.

It noted that global automobile demand is also facing macroeconomic pressures, with the beginning of calendar year 2026 (CY26) showing weaker trends despite moderate growth in the previous year.

Global passenger vehicle sales grew about 4.5 per cent year-on-year in 2025. Among major markets, China recorded the strongest growth at 9.1 per cent, while the United States and Europe saw modest increases of 1.9 per cent and 0.5 per cent respectively.

However, early data for 2026 indicates a slowdown. According to provisional figures, global vehicle sales fell by 1.2 per cent in January.

Sales declined across major markets, with China falling by 6.8 per cent, the United States by 0.8 per cent and Europe by 3.9 per cent.

The report said the sharp decline in China was mainly due to the withdrawal of subsidies that had earlier encouraged strong buying activity in the final quarter of 2025. As a result, the share of new energy vehicles (NEVs) dropped to 40.3 per cent in January from 52.3 per cent in December.

In the United States, rising vehicle prices and affordability concerns affected sales. The report also noted that the expiry of the federal electric vehicle tax credit worth USD 7,500 added further pressure on demand.

Elara Securities said several global original equipment manufacturers expect demand to remain subdued through 2026 based on recent financial results and industry outlooks.

Automakers are projecting flat or marginal growth in the United States and Europe, while conditions in China remain challenging. For example, Mercedes-Benz has forecast global sales growth in the range of minus 2 per cent to plus 2 per cent.

The report also highlighted that automakers are increasingly recording write-offs related to electric vehicle investments as companies adjust their EV strategies to changing market conditions.

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However, the outlook for commercial vehicles appears relatively stronger. Volvo Group has upgraded its demand outlook for Class 8 trucks and now expects growth of 2.9 per cent in Europe and 2.7 per cent in the United States in 2026.