DETROIT — “A lot of cost and a lot of chaos.” That’s how Ford Motor CEO Jim Farley described the state of the automotive industry earlier this year amid geopolitical tensions, tariffs, inflation and other disruptions.

All those factors created massive uncertainty for the U.S. automotive industry that led to relatively bearish outlooks for the sector in 2025. Some of those concerns have come to fruition, but the industry has proven to be far more resilient than many had expected.

“Six months into the onset of tariffs, we’ve been positively surprised by the extent to which the industry has held in better than anticipated,” Barclays analyst Dan Levy said in an investor note last month that upgraded the U.S. auto/mobility sector to neutral from negative.

The neutral rating by Barclays speaks volumes about the state of the automotive industry right now, according to auto executives, insiders and analysts who say circumstances aren’t as bad as they once feared — but also that they still aren’t as positive or certain as they could be.

S&P Global last week released a new report explaining how tariff burdens have eased, but noting that demand headwinds persist amid slowing disposable income growth, consumer pessimism and fluid trade policies. The government shutdown also adds uncertainty to the economic outlook, the firm said.

The cautiousness followed S&P revising its U.S. light vehicle sales estimates upward by about 2%, to 16.1 million vehicles for 2025, and to 15.3 million, up 200,000, in 2026.

Part of what’s driven the unexpected optimism has been industry sales and production holding up much better than expected, in addition to broader macroeconomics such as consumer spending being relatively stable.

“The [economic] outlook is getting better, and part of it is realizing that tariffs didn’t end the world, and that applies to the auto market as well,” Cox Automotive’s chief economist, Jonathan Smoke, told CNBC. “I think we can navigate it, and I’m holding on to that optimistic outlook.”

Such optimism will be tested as major automakers such as General Motors, Ford and Tesla begin announcing third-quarter results this week.

Each of the American automakers is expected to report double-digit declines in adjusted earnings per share but remain profitable on an adjusted basis, according to analyst estimates compiled by LSEG.

“We expect Q3 earnings that [are] generally in line to slightly above expectations. Industry production did come in better than expected,” Wolfe Research analyst Emmanuel Rosner said in an Oct. 10 investor note. “But as always there are nuances to consider.”

Tariffs have cost automakers billions of dollars this year, but deregulation of fuel economy penalties, as well as corporate gains under the Trump administration’s “One Big Beautiful Bill Act,” are expected to help offset those costs, Ford’s Farley and others have said.

Meanwhile, there are red flags of stress in auto lending for lower credit buyers, including the recent bankruptcy of subprime auto lender Tricolor — but sales and pricing of new vehicles through the third quarter remained far better than many had expected.

“There’s some positives for next year, but there could also be some really bad negatives if there’s a freak out on tariffs or the consumer finally breaks down or whatnot,” Morningstar analyst David Whiston told CNBC. “But no one’s calling for a complete crash.”

Whiston — who covers GM, Ford and several auto retailers and suppliers — characterized his outlook as “cautiously optimistic,” saying the significant industry concerns are countered by other bullish circumstances.

UBS analyst Joseph Spak agreed, noting a lot of challenges for automakers such as tariffs and losses on electric vehicles “have already been incorporated into 2025/2026 estimates,” he said in an investor note last month.

In addition to the economic and political concerns, the automotive industry faces significant changes in all-electric vehicle adoption that caused GM last week to pre-report $1.6 billion in special charges during the quarter related to its pullback in EVs.

Adding to this year’s “chaos,” especially for Ford, is a fire last month at aluminum supplier Novelis that is impacting vehicle production. Wall Street analysts estimate the fire to cost Ford between $500 million and $1 billion in operating income.

“The industry is in a lot of flux. It faces an array of challenges,” Elaine Buckberg, a senior fellow at Harvard University and former GM chief economist, said regarding tariffs, EVs and other issues. “The level of volatility they’ve faced over the last seven years or so is unlike what came before.”

Not all have been able to compete successfully. The bankruptcy of U.S. auto parts maker First Brands Group in late September heightened concerns on Wall Street about the health of the private credit market. First Brands had a web of complex debt agreements with a slew of lenders and investment funds globally.

JPMorgan Chase CEO Jamie Dimon last week called the bankruptcies of First Brands and Tricolor Holdings “early signs” of excess in corporate lending, while some Wall Street analysts have written them off as idiosyncratic.

Executives have said automakers, also known as OEMs, or original equipment manufacturers, have so far done their best to assist suppliers when needed and have not passed on added tariff costs to such companies, but it’s unclear how long that may last.

“Suppliers clearly are working as hard as they can with their customers to try and mitigate the impact, understating it’s an important issue to work through,” Jackson said. “That said, there have been a number of different cost pressures that we’ve seen that go beyond the tariffs. … It varies by customer, by OEM.”

Shares of many larger publicly traded suppliers, such as Aptiv, BorgWarner, Dana and Adient, are up double digits so far this year. Even Canada-based Magna International, which at one point was expected to be one of the companies most impacted by tariffs, is up roughly 7%.

Those gains are despite the third quarter marking the 14th consecutive quarter of building pessimism by North American auto supplier executives, according to MEMA’s most recent “Vehicle Supplier Barometer” released earlier this month.

Adding to supplier concerns are continuing issues with tariffs between the U.S. with Mexico and Canada as well as the Trump administration’s ongoing trade war with China, where many rare earth materials, some of which are used in vehicles, are processed and sourced.

Economists have warned the U.S. economy is increasingly K-shaped following the coronavirus pandemic, with consumers experiencing different realities depending on their income level.

Used vehicle retailer CarMax was the first major auto-related company to sound the alarm on the consumer late last month.

“The consumer has been distressed for a little while. I think there’s some angst,” CarMax CEO Bill Nash told analysts earlier this month, with an auto lending executive for the used car retailer warning the “cracks” are “an industry issue.”

But that “issue” appears to only be for lower-income consumers or those with subprime credit, many of whom are not new car buyers.

Wealthier Americans have been assisted by rising house values, lucrative stock market returns and favorable credit, while lower- and middle-income buyers have faced tighter budgets and have been hit hard by rising inflation.

Fitch Ratings reports 6.43% of subprime auto loans in August were at least 60 days past due, in line with a record high of 6.45% that was hit in January. Delinquency rates for borrowers with higher scores have remained relatively stable.

“Clearly there is concern about the consumer, because if you’re not in the upper part of the ‘K’ then yes, there is stress,” Cox Automotive’s Smoke said. “But it tends to be a demographic story about median and below income households.”

About two-thirds of new vehicle purchases are made by people whose household income is above the median, according to Buckberg. The U.S. household median income last year was $83,730, according to U.S. Census Bureau estimates

That percentage could continue to grow and impact sales if tariff costs begin getting passed on to new car buyers or the whiplashing regulatory chaos barrels more into the automotive industry.

“That’s really the big question for 2026. I think everyone in the industry is assuming consumers are going to start to get tariffs passed down to them for autos. They haven’t really yet,” Whiston said. “How does the consumer react to that? Will they just take it in stride, pay more and keep going? Or will it just cause a massive freak out? No one knows the answer to that yet.”