As the war in Iran nears the five-week mark, new headwinds are hitting the U.S. auto industry.
General Motors said Wednesday that first-quarter sales fell nearly 10% year over year — the company’s largest drop in almost four years.
Key factors
High interest rates and elevated vehicle prices have already slowed demand in early 2026, according to The Wall Street Journal.
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Now, rising gas prices tied to the war are adding another layer of pressure — giving car buyers more reason to hold off.
Sales drop across major brands
Cox Automotive forecasts first-quarter sales declines across several major automakers.
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Just one year ago, GM reported first-quarter sales rose 17% as buyers rushed to get ahead of expected tariff-driven price increases.
Ford is expected to fall about 9%, while Subaru (-16.7%) and VW (-19.8%) face steeper, double-digit drops. Honda reported a 5% decline, and Toyota sales were flat.
The report noted weaker demand for smaller vehicles, particularly compact cars and SUVs, a sign that affordability pressures are hitting lower-income buyers the hardest.
Toyota sales executive David Christ told the WSJ shoppers are taking more time and thinking twice before committing.
“People are taking a little longer to make the decision, and when they make the decision, they’re saying ‘Do I really have to do this?’” he said.
Gas prices add pressure
Oil prices jumped to nearly $110 a barrel following President Donald Trump’s latest comments on the war, and gas prices remain elevated.
According to AAA, the national average for a gallon of gas hit $4.08 Thursday, up from $2.99 just one month ago.
Cox Automotive chief economist Jeremy Robb said in the WSJ that early demand in the quarter had been improving before the war shifted the trajectory.
Toyota’s Christ added that higher fuel costs are now part of the conversation for buyers.
“There’s definitely buzz on the showroom floor of, ‘How long are they going to be high? Can I afford to keep my SUV?’“ he said.
Outlook
Despite the weak start, Cox Automotive has not significantly changed its full-year sales forecast.
But analysts point to continued uncertainty tied to the war, affordability challenges and broader economic pressures.
