Mikkel Christensen
A turbulent mix of trade tensions, policy shifts and surging Chinese production is reshaping the global car industry.
A turbulent mix of trade tensions, policy shifts and surging Chinese production is reshaping the global car industry.
While established manufacturers grapple with falling profits and strategic missteps, Australian consumers may find opportunity in the upheaval.
According to The Australian Financial Review, motoring writer Tony Davis describes the global automotive sector in 2026 in a single word: chaos.
Chinese manufacturers are aggressively pursuing market share, Europe is battling rising costs and softening environmental targets, and the United States is retreating behind tariff barriers.
Chinese output reached a record 34.78 million vehicles last year, three times that of the US.
Australia is already China’s second-largest export destination for cars and could soon become its biggest.
Market share battle
The surge is intensifying competition locally. Oversupply and new entrants are placing downward pressure on prices across multiple segments.
SUVs now account for more than 60 per cent of Australian sales, with large utilities making up almost 20 per cent. However, sales of US-style pick-ups such as the Ram and Ford F150 fell 17.5 per cent last year.
Chinese brand BYD, which entered Australia just three and a half years ago, is now the country’s sixth best-selling marque.
Hybrid shift
The Federal Chamber of Automotive Industries reports a 14 per cent January decline in pure petrol vehicle sales, as buyers shift to hybrids and plug-in hybrids under the New Vehicle Efficiency Standard.
“In January, 5161 plug-in hybrids were sold (5.9 per cent of sales), a 170.5 per cent increase on January 2025,” it states. “Hybrid vehicles made up 17.4 per cent of sales, while battery electric vehicles accounted for 8.4 per cent of the market from all sources.”
Despite more affordable electric models, EV uptake remains below expectations.
Real-world gap
Research from the Brussels-based Energy and Climate Intelligence Unit claims plug-in hybrids consume 490 per cent more fuel in real-world driving than official laboratory figures suggest, largely because owners fail to recharge regularly.
The group argues that fully electric vehicles could save drivers $2000 annually compared with PHEVs.
Meanwhile, global carmakers face supply chain disruption, weakening Chinese demand for foreign brands and costly EV investments. General Motors estimates policy reversals have cost it more than $US7 billion.
Yet China itself may face overcapacity, with factories reportedly able to produce twice current output. Rapid expansion has also strained after-sales support, with some Australian customers reporting long waits for spare parts.
For buyers, however, fierce rivalry and technological change may translate into better deals in an unsettled market.
Sources: The Australian Financial Review,
