Written by Janis Seabolt, Director of Mobility Programs, Ann Arbor SPARK
Of all conferences, I most look forward to the Federal Reserve Bank’s Automotive Insights Symposium. This gathering provides deep, data-driven panel discussions and table conversations with automotive executives, suppliers, policy analysts, media, and industry professionals. The topics set the focus of media content and major events for the rest of the year.
Read on for my summary.
The Year Ahead for Automotive
Trade policy, manufacturing, and automation dominated the Federal Reserve Bank 32nd annual Automotive Insights Symposium, led by Policy Advisor Kristin Dziczek. The annual conference examines the health of the automotive industry as it intersects with federal policy, global trade, technology, manufacturing capacity, consumer sentiment, and the broader economy.
Top takeaways:
- Trade and regulatory policy swings are core business risks. Tariffs, USMCA complexity, and regulatory volatility have compressed margins and reshaped investment decisions. Small suppliers are under significant strain.
- Widening gap between luxury and mainstream buyers. Mainstream consumers are delaying, trading down, buying used, and rolling negative equity forward. Luxury buyers absorb higher prices without sacrificing options. Manufacturers have cut mid-grade options packages to simplify offerings.
- AI, data, and automation are essential for competitiveness. Faster design cycles, predictive maintenance, and smarter operations are no longer optional. Small and mid-size manufacturers must embrace AI to remain competitive.
Federal policy: Volatility and margin pressure
It was a topsy-turvy start as analysts modeled and remodeled the financial impact of federal policy changes. OEMs adapted quickly, with tariff costs ultimately distributed across manufacturers, suppliers, and consumers.
Trade policy has become a structural business risk. Tariffs and margin compression are hitting suppliers hardest, increasing the likelihood of consolidation and putting supply chain resilience at risk.
USMCA complexity adds cost and administrative burden. Sourcing decisions increasingly come down to wage + automation + tariff math. Tariffs alone will not necessarily drive reshoring.
Speakers emphasized that extreme federal policy swings undermine long-term manufacturing investment. Market-driven, stable, and predictable policy is critical for innovation, global trade relationships, and domestic supply chain management.
Global implications
Chinese overproduction remains a concern. Chinese vehicle sales are strong across Asia and South America and are expanding rapidly into Europe.
The U.S. remains highly dependent on China for critical components such as semiconductors and rare earth materials. The domestic supply chain is not currently equipped to reshore these inputs at scale.
Federal trade policy is creating ripple effects with long-standing partners. At the same time, the U.S. risks exclusion from emerging trade agreements as partners diversify relationships in response to tariff volatility.
Kevin Brady, former U.S. House Ways and Means Chair, commented, “If you were a successful business and you had a customer who was not just your best customer, but also your biggest investor, your most important supplier, what would you do with that relationship? Would you discard it, or would you build upon it and strengthen it, especially when you’ve got China out there eager to eat our lunch?”
Innovation
OEMs and suppliers were clear: policy whiplash inhibits long-term investment and innovation.
Electrification remains the long-term direction of the industry, but OEMs say healthy growth is market-paced. Electric and hybrid vehicles remain the fastest-growing segment, with OEMs emphasizing the need for restoring incentives and infrastructure support.
AI adoption is accelerating beyond vehicle development. From faster design cycles and predictive maintenance to improved financial modeling, AI is becoming a competitive necessity.
Automation must be strategic. Effective automation begins with root-cause analysis and data integration — not simply replacing human movement with robotics.
Safety technology conversations focused on improving the effectiveness of existing ADAS systems, particularly driver engagement and pedestrian detection, rather than layering on additional complexity (and cost).
Sales and revenue strategy
Vehicle sales are expected to remain flat, with projections of approximately 15.9–16 million units in 2026. Lean inventories (~45 days) and simplified option packages appear to be the new normal.
Affordability remains the central constraint. Luxury buyers are resilient, while mainstream consumers face higher financing costs, reduced feature availability, and rising negative equity.
In response, OEMs are increasingly focused on software and services as recurring revenue drivers to offset tighter margins on vehicle sales.
The industry demonstrated remarkable resilience this year. Long-term concerns about profitability, US manufacturing, and global trade remain. However, long-term concerns about supplier profitability, domestic manufacturing strength, and global trade stability remain.
Presentations from the Federal Reserve Bank Automotive Insights Symposium are available for replay.
