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EV Winter Looms: Auto Sector Faces Sales Slump
8 Dec, 2025
Summary
- US light-vehicle sales projected to decline to 15.9 million units in 2026.
- Electric vehicle sales expected to fall 20%, with market share retreating.
- General Motors upgraded, while Tesla, Rivian, and Lucid face downgrades.
The U.S. automotive industry is bracing for a significant downturn, with Morgan Stanley predicting an "EV winter" that will depress demand and earnings through 2026. Light-vehicle sales are anticipated to drop to 15.9 million units, and electric vehicle volume is projected to fall by 20%, reversing market share gains.
Despite the challenging outlook, General Motors has been upgraded due to its disciplined inventory management and a strategic shift towards high-margin trucks and SUVs. However, Tesla's rating has been lowered, as its valuation appears to already price in optimism around autonomous driving and robotics, facing margin pressure and lower volumes in the near term.
Other electric vehicle manufacturers, Rivian and Lucid, have been downgraded to "Underweight." This reflects concerns about their exposure to declining EV demand and uncertainties surrounding their long-term profitability. Factors such as tighter credit, inflation, and the phasing out of tax credits are expected to significantly impact consumer spending on vehicles.
