January 2026 Light Vehicle Production Forecast

Europe

European light vehicle production is set to increase slightly in 2026 and 2027 relative to our previous forecast, though the region will see a modest year-over-year decline in 2026 due to adverse trade flows, particularly from rising Chinese imports.

Domestic demand is growing marginally, but mainstream production is expected to fall by 2%, while premium brands are forecast to grow by 2%, driven by electric D-SUV launches. Asian OEMs will decline overall, with Chinese OEMs gaining ground as Japanese and Korean OEMs lose share.

A rebound is expected in 2027 as Chinese OEM localization boosts volumes, with a positive trend continuing into 2028/2029 before new CO2 regulations impact demand in 2030.

Greater China

Greater China’s light vehicle production outlook has been upgraded noticeably for 2026-2028, despite a recent slump in passenger vehicle retail sales. The reduction in trade-in and NEV incentives has dampened domestic demand, but export activity—especially for NEVs and PHEVs—remains a powerful growth driver.

Nearly half of China’s exports in December 2025 were NEVs, and a prospective EV price agreement with the EU should support continued export flows. Although a quick recovery in domestic demand is unlikely in early 2026, robust export performance is expected to sustain production growth.

Japan/Korea

Japan’s production outlook for 2026-2028 has been lifted due to increased domestic demand from tax reductions and the abolition of the environmental performance tax, as well as the reallocation of Mazda CX-30 production.

Long-term gains are also anticipated from strong ICE variant sales in the US and Suzuki’s EV exports to Europe. South Korea’s short-term production has been upgraded, driven by rising hybrid SUV output, with 2028 also seeing a modest increase as hybrid demand strengthens.

North America

North America’s 2026 light vehicle production forecast has been revised downward, reflecting a 0.8% decrease amid evolving market dynamics. The sector has been shifting towards higher-end vehicles, but automakers face margin pressures as they balance pent-up demand with the need to bolster sales through lower-priced models.

Asian manufacturers are increasing imports at the expense of local production, seeking better capacity utilization in home markets despite US tariffs. Inventory levels are expected to remain healthy, supporting a stable US sales environment over the next two years.

South America

South America’s outlook sees a small production upgrade for 2026, driven mainly by Brazil’s export growth, while volumes remain stable for 2027-2028. The region benefits from renewed import demand in Argentina, but overall market and macro conditions do not warrant significant forecast changes at this time. Modest gains in Brazil and marginal stability across other markets characterize the outlook.

South Asia

South Asia’s production forecast has been raised for 2026-2028, led by India’s robust demand outlook following reductions in the Goods and Services Tax (GST) for various vehicle sizes. Automakers are adjusting production schedules to maximize opportunities from this demand surge.

ASEAN markets show mixed trajectories, with Vietnam and Indonesia driving growth, but Thailand’s slower economy and tighter loan approvals temper the recovery. Downward revisions for ASEAN in 2027-2028 are focused on Thailand, reflecting ongoing economic and export challenges.