In this articleFJPMFollow your favorite stocksCREATE FREE ACCOUNTA worker at Ford’s Kentucky Truck Plant on April 30, 2025.Michael Wayland | CNBCDETROIT — “A lot of cost and a lot of chaos.” That’s how Ford Motor CEO Jim Farley described the state of the automotive industry earlier this year amid geopolitical tensions, tariffs, inflation and other disruptions.All those factors created massive uncertainty for the U.S. automotive industry that led to relatively bearish outlooks for the sector in 2025. Some of those concerns have come to fruition, but the industry has proven to be far more resilient than many had expected.”Six months into the onset of tariffs, we’ve been positively surprised by the extent to which the industry has held in better than anticipated,” Barclays analyst Dan Levy said in an investor note last month that upgraded the U.S. auto/mobility sector to “neutral” from “negative.”The neutral rating by Barclays speaks volumes to the state of the automotive industry right now, according to auto executives, insiders and analysts who say circumstances aren’t as bad as they once feared — but also that they still aren’t as positive or certain as they could be.S&P Global last week released a new report explaining how tariff burdens have eased, but noting that demand headwinds persist amid slowing disposable income growth, consumer pessimism and fluid trade policies. The government shutdown also adds uncertainty to the economic outlook, the firm said.Jim Farley, President and CEO of Ford Motor Company, speaks at a Ford Pro Accelerate event on Sept. 30, 2025 in Detroit, Michigan. Bill Pugliano | Getty ImagesThe cautiousness followed S&P revising its U.S. light vehicle sales estimates upward by about 2%, to 16.1 million vehicles for 2025, and to 15.3 million, up 200,000, in 2026.Part of what’s driven the unexpected optimism have been industry sales and production holding up much better than expected, in addition to broader macroeconomics such as consumer spending being relatively stable.”The [economic] outlook is getting better, and part of it is realizing that tariffs didn’t end the world, and that applies to the auto market as well,” Cox Automotive chief economist Jonathan Smoke told CNBC. “I think we can navigate it, and I’m holding on to that optimistic outlook.”Such optimism will be tested as major automakers such as General Motors, Ford and Tesla begin reporting third-quarter results this week.Each of the American automakers is expected to report double-digit declines in adjusted earnings per share but remain profitable on an adjusted basis, according to analyst estimates compiled by LSEG.”We expect Q3 earnings that [are] generally in line to slightly above expectations. Industry production did come in better than expected,” Wolfe Research analyst Emmanuel Rosner said in an Oct. 10 investor note. “But as always there are nuances to consider.”Balancing actThe automotive industry is in a bit of a balancing act.Tariffs have cost automakers billions of dollars this year, but deregulation of fuel economy penalties, as well as corporate gains under the Trump administration’s “One Big Beautiful Bill Act,” are expected to help offset those costs, Ford’s Farley and others have said.Meanwhile, there are red flags of stress in auto lending for lower credit buyers, including the recent bankruptcy of subprime auto lender Tricolor — but sales and pricing of new vehicles through the third quarter remained far better than many had expected.”There’s some positives for next year, but there could also be some really bad negatives if there’s a freak out on tariffs or the consumer finally breaks down or whatnot,” Morningstar analyst David Whiston told CNBC. “But no one’s calling for a complete crash.”Fronts of the GMC Sierra Denali,Tesla …
