The U.S. automotive industry faces numerous changes and challenges amid an evolving landscape and impacts from the One Big Beautiful Bill Act (OBBBA). With this in mind, it is critical for businesses to stay informed about the latest industry trends and market factors to remain competitive and compliant.
In this article, Bryan Wright, assurance partner at Forvis Mazars, sits down with Andrew Leong, assurance director at Forvis Mazars, for a Q&A to discuss the year’s U.S. automotive industry outlook. Their conversation covers trade impacts, labor and supply chain challenges, market trends, and automation for industry insiders, all factors that may affect the sector in 2026 and beyond.
Bryan Wright: Can you share your background and the type of automotive clients you serve at Forvis Mazars?
Andrew Leong: I was born and raised in metro Detroit, so most things in this region revolve around the automotive industry. It’s in the culture. This impacts my career, where my role in public accounting has involved the automotive industry from day one. Most of my career has been in public accounting in the automotive industry, all the way down to the supply chain.
I focus on Tier 1 and Tier 2 automotive suppliers (mainly multinational parts suppliers). These clients are organizations ranging from small to quite large companies with anywhere from $10 million to $5 billion in revenue. Our current emphasis is on those multinational corporations that are foreign owned with a large U.S. component that may not be subject to local U.S. reporting. Still, this is dependent on size.
In general, Tier 1 suppliers prepare and manufacture automotive-specific parts, such as semi-complete items that are only used for automotive applications, such as dashboards, steering wheels, suspension components, or exhaust systems that can’t be used for anything other than automotive, that are sold directly to original equipment manufacturers (OEMs). Tier 1 companies will sell parts and complete the final assembly as OEMs to larger automotive manufacturers such as Ford, GM, Hyundai, Kia, or Toyota.
Tier 2 suppliers sell components used by the Tier 1 suppliers to manufacture automotive parts. They are considered part of the supply chain, such as plastic clips, tubes, or specific sheet metal components.
What is the current economic outlook for the automotive industry in light of the trade uncertainties and the implications of global tariffs?
Most of the automotive industry is structured as a just-in-time scenario, meaning there isn’t a surplus of inventory or stock on hand. This allows the industry to be dynamic.
Overall, client feedback and a broad industry outlook are cautiously optimistic. Even with big changes happening, we still see a lot of optimism about things working out.
There are challenges ahead; it’s just a matter of how we handle them. So, specifically with the global tariffs in the near term, a lot of executive feedback we’ve received is pushing tariff costs along to customers to keep things moving. The emphasis is to gain more clarity on the long-term outlook for tariffs and mitigate those costs when these trade deals come to fruition (especially with other countries). There are still questions about whether the tariffs will persist.
Most companies have reached deals by the half-year mark, with the second half of the year still somewhat up in the air. Understanding each organization’s situation and how to proceed is crucial.
Are U.S. automotive companies looking at more domestic supplier options, or is this a longer-term evaluation for companies considering supply chains and government policies?
Resourcing is a big cost mitigation strategy. These Tier 1 and Tier 2 suppliers can renegotiate pricing contracts as a start. That is the short-term action.
If they fail, I’ve seen clients explore supply chain resourcing domestically and abroad to help mitigate the effects of tariffs. Some even consider bringing production back to the U.S. and moving entire facilities and production here. Although, we know that it is a time- and labor-intensive process that takes years to launch appropriately (and train employees adequately).
Some companies are not fully committed to these actions until a clearer economic outlook exists. If tariffs persist, they will likely explore more U.S.-based investments.
What feedback have your automotive clients shared on the recent tax act OBBBA? Do they see this overall as a stimulus for growth in the automotive industry?
It’s a bit of a mixed bag of input. OBBBA has many aspects and implications. A few key changes that impact the automotive industry include sunsetting electronic vehicle (EV) credits before the end of this year. The industry has been going full bore into EV production and development, anticipating strong governmental support surrounding this change. I think the level of industry investment in this space is too deep to turn back at this moment. Time will tell.
Similarly, OBBBA changes the corporate average fuel economy (CAFE) standards. Previously, a civil penalty was levied for companies that didn’t comply, but the act reduced the penalty to zero, meaning it is effectively gone (since the fee level is zero) even though it still exists.
The act also loosens U.S. Environmental Protection Agency (EPA) and miles-per-gallon (MPG) requirements for newly produced vehicles, giving companies more latitude to sell more economy cars if they are not meeting the higher or increasing MPG standards.
In addition, there is an interest deduction on new auto loans for U.S.-made vehicles. Due to tariffs, we likely will see an increase in pricing (which will be passed on to the customer). However, this deduction might offset the incentive to buy American-made cars.
So, what will the tariffs’ effect be on overall demand? It is hard to predict, and we can’t be entirely sure. When the tariffs were initially announced, demand dropped a bit as the industry waited for a clearer picture. It is still a wait-and-see environment for how the market responds.
Can you provide some feedback on the labor markets and how challenging the environment is for automotive industry companies? Are they able to find the skilled labor needed?
It’s still very challenging to find skilled labor in the industry. There is still high demand for those in skilled trades like machining or electrical engineering for EVs. Talent is a huge factor, as well. The market is quite competitive in attracting and retaining top talent for the automotive industry. On the production side, it is more of a challenge to entice people to work in factories. I hear that folks are having difficulty finding new recruits at the plant level. Overall, there are fewer applicants for those roles, which causes supply chain disruptions.
In addition, the United Auto Workers (UAW) negotiated a 25% wage increase with all U.S. OEMs two years ago. This has caused increased costs, which play into the labor market (not only by allowing for higher wages, but also pushing OEMs toward automation if they don’t want to allot money to wages). Companies compete with each other to offer the best incentives and salary packages for the most skilled individuals.
How do you see the market evolving over the next five to 10 years with the pace of change in technology and automation?
In terms of advancement, electrification, automation, and EVs are big drivers in the industry. In the last few years, there has been a huge push for EVs, and everyone is either making their own version of an EV, updating an existing EV product, or increasing hybrid offerings. This has been coming for years now, and the industry is quite deep in its investments. With those commitments, it is too costly for companies to turn back now. I think this will be a balancing act of maintaining existing supply chains and investing in the future.
We know from the past that there are organizations that plan ahead and those that do not respond to the ways the industry moves, or they fail to respond quickly enough to keep pace. Those in the latter group get left behind, so everyone is eager to understand what direction the industry is going so they can follow suit as soon as possible.
Artificial intelligence (AI) isn’t prominent among automotive applications, besides software systems that use hyperautomation. Vehicle management and fuel management systems can utilize AI for various functions and optimize more manual tasks.
Moreover, the AI discussion veers into autonomous driving systems. Self-driving cars and Waymo taxi programs are currently in use, though ethical and technical challenges may slow down widespread adoption at the moment.
If you have any questions or need assistance, please reach out to our manufacturing team at Forvis Mazars.