Automotive Industry: Globalization Without Free Trade

Thomas Karig/The Pulse of the Industry

As the first half of 2026 comes to a close, there is alarming news in the automotive world. Volkswagen plans to drastically reduce its workforce and close several plants to align its capacity with current demand. Sales for the Volkswagen Group have fallen 6% so far this year.

BYD, the most successful Chinese company in recent years, reports a 16% drop in sales. Changan, another major Chinese automaker, is selling 20% less. General Motors and Ford have recorded declines of 9% and 10%, respectively. Even Toyota, the world’s top-selling automaker, has seen a 3% decline.

But there’s good news, too. Stellantis boasts an 11% increase in sales, Tesla a 16% increase, and Suzuki a 10% increase. And among Chinese brands, there are also those that managed to improve their performance: SAIC with a 13% increase and Chery with an 8% increase.

So, what’s going on? Is there a crisis or isn’t there?

The truth is that the world’s largest market, China, contracted by 6% in the first half of the year, which equates to about 700,000 fewer cars sold. But it turns out that Chinese brands as a whole saw only a 3% decline, while German brands lost 25% of their market share. This largely explains the volume losses suffered by Volkswagen. The Chinese market also affected Toyota.

It is clear that the Chinese market, which grew rapidly for two decades, is reaching a saturation point, coupled with slower growth in the Chinese economy overall. The Chinese government, whose finances are under pressure, has reduced or eliminated incentives for car purchases.

The U.S. market suffered a sharp decline in March following the outbreak of the war with Iran. Since then, sales have recovered. The first half of the year closed with a strong June, ending 2.6% below last year’s figures. Nothing dramatic, then, happened in the North American market. Japanese and Korean brands remained stable, as did Volkswagen. Dodge RAM grew, while GM and Ford were the losers.

The European market also delivered good news, growing by 6%, largely driven by a substantial increase in sales of hybrid and electric cars. June was particularly strong, with an increase of nearly 14%, and all major markets in the European Union posting double-digit growth.

The Volkswagen Group remains the leader in the European market, with a 26.5% share. However, its growth rate of 2.6% lagged behind that of the market as a whole. Stellantis, second in volume, grew by 6%. The rest of the growth was driven by Chinese brands, which view the European market as an outlet for cars that are no longer selling in their home countries.

And finally, Mexico. Sales are also up here, 6% higher than in 2025. As in Europe, the momentum did not come from traditional brands. VW grew 1.5%, GM 2.5%, Toyota 3%, and Nissan fell 1%. The bright spots are Chrysler at +27% and SEAT at +8.5%. The ones that really drove the market were (surprise) the Chinese: MG at 20%, Changan at 57%, and Geely at 250%.

Conclusion: in a market that experienced its usual fluctuations, the performance of automakers varies widely. Chinese automakers continue to gain market share outside China with a product lineup that covers all segments, competitive pricing, and technologically appealing vehicles.

The two giants, Volkswagen and Toyota, are struggling to maintain their market share in China but remain strong in their home markets (which, in Toyota’s case, includes the United States). GM and Ford have focused almost entirely on the U.S. market and are unable to offset the fluctuations it experiences. Stellantis is making headway again, trying to streamline its overly extensive portfolio. And Hyundai/Kia are showing remarkable stability across all markets.

What the automotive industry has practiced for decades remains true: you must have a presence in various markets across different continents to balance changing demands. It’s just that this is now more difficult—not only because of the tariffs that must be paid, but also because markets are becoming increasingly diverse in terms of legal requirements and consumer expectations. Some companies have more trouble than others overcoming these challenges, but all must face them.

Thomas Karig is a speaker and independent organizational consultant specializing in the automotive industrythomas.karig@tkonsult.com.mx