The 2035 combustion engine band is a rule that says cars with gasoline or diesel engines should stop being sold after 2035. This pushes automakers to make electric cars.
EV tax credits are discounts from the government that lower how much you pay for an electric car. Many cars no longer get this discount, so they cost more.
EVs are cars that run on electricity instead of gasoline. They don’t give off exhaust fumes, which helps keep the air cleaner.
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Air down U.S. compact crossover lineup comes with big price hikes. Automakers hope for a reprieve on Europe's 2035 combustion engine band. And it looks like this was the year AI started making a big mark on car making and sales. Plus, Kia America Vice President of Sales Operations, Eric Watson, joins the show to talk about the automakers' affordability strategy and why he's optimistic about 2026.
It's been so much disruption in the auto industry, and I think as we move forward, if the consumer can stay resilient, I think the auto industry will come back next year and be very strong.
Let's run through all the news. You need to know to keep up in the auto industry. Audi is simplifying its Q3 compact crossover lineup for 2026, but raising prices significantly.
The Q3 design Q3 will come in just one trim, S-line, starting at nearly $45,000. That's $39,000 more than the base 2025 model.
The move reflects a broader strategy at Audi, which has implemented price increases across its lineup while adding free scheduled maintenance for all 2026 models.
The Q3 is built in Hungary, making it subject to new US tariffs. And while European buyers will get plug-and-hybrid and mile hybrid options, US customers only get the non-hybrid version.
Automakers are pushing Brussels to weaken its 2035 combustion engine band. The EU is set to unveil an auto industry support package on December 10.
Auto companies want regulators to allow CO2 neutral fuels, plug-and-hybrid and range extenders beyond 2035.
Arguing the market, not legislators, should decide when to phase out combustion engines. European automakers are facing the same challenges hitting US brands.
Slower than expected demand, charging infrastructure gaps, plus fierce Chinese competition.
Battery electric vehicles hold just 16% of Europe's market through October, far below projections.
An artificial intelligence made major inroads in the auto industry this year, but experts say it's still in the early stages of its potential.
Automakers and dealerships deployed AI for everything from inventory management to phone answering, while a startup even launched an AI tool that negotiates car prices for consumers.
But data gaps between dealers and automakers remain a barrier to maximizing the technology's impact.
Joining me now to talk more about this is automotive news retail tech reporter Mark Holmer. Mark, welcome back to Daily Drive.
Thank you. It's great to be here.
So Mark, we've been following these trends over the past year. What can we say definitively about the scope of AI in the auto industry now compared to say a year ago?
Well, one thing that is really, really clear is it's become far reaching. It helps dealerships, stock vehicles, some manufacturers are using it for quality control.
Dealerships are out in their phone systems with intelligent AI agents.
They're scheduling service appointments. It's permeating into all kinds of things.
Well, you mentioned this trend where AI can build software on command without needing a developer.
Can that be a threat to DMS providers like CDK or Reynolds?
That one would be longer into the future, but it's something that could provide a competitive threat.
The fact that software is intelligent enough now to develop software. That is an application that can be used in all kinds of development, not just in auto.
But it's something that could eventually be a point of concern for the dealership management system companies.
Good stuff. Mark Holmer is a retail tech reporter for us at Automotive News. Mark, thank you so much for joining me.
And those are today's headlines. You can find more details on all those stories at autonews.com.
Coming up, Kia Americas, Eric Watson says there's plenty of reason to be optimistic about EVs in 2026 and the US car market in general.
He joins the show next on Daily Drive.
Public charging can make or break a road trip for EV drivers.
Camille Terry is CEO and co-founder of Charger Health. She joins us on the Automotive News Shift Podcast this week to talk about why nearly one in three charging attempts still fail, even as Charger Uptime improves.
We just need to understand that these assets that we're working with are connected devices and so the same level of rigor and practices, best practices that we see in other industries that use IT, we should be applying that to charging.
I'm Hannah Lutz and I'm Molly Boygon. Terry also explains why the charging industry needs more standardization and more consumer education.
And as always, we bring you the latest from the world of automotive technology and innovation. That's available Sunday morning on Shift, wherever you get your podcasts.
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Welcome back to Daily Drive. I'm Kellan Walker. Kia is betting big on hybrids and affordability as it plans for another year of growth in 2026.
The brand just unveiled its redesigned Telluride SUV at the LA Auto Show and it comes with a new turbo hybrid powertrain that boosts both performance and fuel economy.
Kia Vice President of Sales Operations Eric Watson says Kia is ramping up production of entry-level trims and models under $35,000 to keep new cars within reach.
He spoke at the LA Auto Show with our own Jerry Hirsch.
Hi, we're with Eric Watson, who's the Vice President of Sales Operations at Kia. Thanks for joining us at Automotive News Eric.
Yeah, great to be with you.
So we're at the LA Auto Show and Kia showed off its new three-row SUV. It's the 2027 Telluride.
So the first question that comes up is it's 2025. Why are you calling this at 2027?
Well, we couldn't be more excited for the launch of the new Telluride. The reason it's a 2027, we're not going to go on sale until January and 2026.
So 2027 model year, it's really showing a leap forward in where we are. Also helps us get better residual values by having that early model year.
And we think it's just the right timing and the right thing to bring out for our customers.
Tell us what you think of the market for three-row crossovers. Who do you see as your competitors, your rivals?
Who do you want to conquest? Yeah, I think the three-row SUV segment is important for a brand.
It allows people to grow with you and creates a lot of loyalty. There's a lot of good competitors in this segment.
We've really seen the rise of Toyota this year in this segment. They've got a lot of good competitors.
But we think the Telluride is really going to stand out. We've grown from 60,000 sales a year when we launched it to over 120,000.
This year in our aspirations to grow continue. And we think more people will enter into this segment.
Why do you think more people are entering into this segment? We're also at a time when average transaction prices are at record highs.
And it's a real struggle for some people to purchase new vehicles.
Yeah, you're absolutely right. Affordability is becoming an issue. And I think a lot of things, for example, in the New Telluride we're coming with a hybrid engine.
So people are going to get great power because we've got a turbo high-ribbit. They're also going to get a lot of efficiency.
So that will provide some savings and better fuel economy up to 35 miles per gallon. So it's going to be a great product.
The LA Auto Show comes always right before Thanksgiving. And when we're at Thanksgiving, we're just around the corner for the next year.
What encourages you about the auto sales segment, auto sales in general, for next year?
I think 2025 there's been so much disruption in the auto industry with regulations changing, the EV tax credits going away, the tariffs that have been an issue for the entire industry.
We're starting to get a lot of stabilization around those issues. And I think as we move forward, if the consumer can stay resilient, I think the auto industry will come back next year and be very strong.
From the key standpoint, we've got some great new products coming out next year. We're going to have an onslaught of new product.
We're also bringing a ton of hybrids and increasing our hybrid production. So our path forward is very bright. I think we'll outperform the industry.
Tell me about the focus of your hybrid production. One of the things you've done with this Telluride is that you've used the hybrid drive to improve performance.
It's just not a fuel economy. That's right. Is this how what you're going to do with the rest of your hybrid?
Yeah, I think we already see that today, especially in our sportage, so rental hybrid and now Telluride, we are going after that combination.
So we're not ultra-focused on the fuel economy. We want people to have better performance. So you're getting more horsepower, more torque, and that fuel efficiency in our hybrid offerings.
This is a new hybrid system for a large vehicle.
Are you working on a new hybrid system for smaller vehicles?
I mean, we've got a great hybrid system on our entry-level SUVs today with the 1.6 liter turbo. So this new Telluride at 2.5 liter turbo engine, which is very appropriate for this size vehicle.
So I think we're in a really good spot on our entry SUVs, and now we've got a great powerful turbo hybrid for the larger SUV.
Do you think there's more room to grow hybrid technology? And what will it do for vehicles?
Yeah, I do. I think we continue to pursue a mission of sustainable mobility. EVs will continue to be part of that, and that industry will level out and maybe come back a little bit next year.
But hybrids are going to be an important piece of that. We're going to sell about half of our sportage and half of our Telluride and half of our carnivals are going to be hybrids.
And I think we're producing and giving consumers what they need and what they want at the right time.
Going back to sales, is there anything that scares you about 2026?
I think what you brought up earlier affordability continues to be on customers' minds. We continue to look at our trim mix. So we're starting to build a lot more mid and entry-level trims to address consumer affordability.
We're also increasing our volume and production on key models like the K4, which is our entry sedan starting in the low to mid $20,000 range.
We've got the Celto's, which is doing well. We've got the Nero. So we've got a lot of cars and that sub $35,000 price point that are helping consumers get into affordable cars.
But that's certainly an issue for the industry as affordability.
Some of the technology you showed today was interesting. For example, if I were to get the offer version, I think you'd call the X-Pro.
I could get a Darth Vader overlay in the cockpit. But if I'm hauling little girls to soccer practice or to Girl Scouts, I could get a Moana overlay.
That's right. Tell me about what you're trying to do to make the inside of the vehicle more interesting.
I think across our product lineup, our connectivity and our cars plays an important role. Whether it's how the customer interacts on the app that we have, the key access app.
You can start your car. You can lock your car. You can check the status of the vehicle if it's an EV to see what the charge is.
But what you're referring to of being able to use Disney or Star Wars characters or even our MBA team partnerships, you can customize the interior dash of your vehicle to be able to display those themes, the colors of them.
And I think it just brings a lot of personality to the car that is tailored and individualized to the customer.
With the MBA things, with Kia, can you only do the Clippers?
Nope, we can do any team in the MBA that, in fact, we've got sponsorships, I think, with 15 teams around the league. So we're very deep in our MBA partnership, and we love all of them.
What other technology features are in the Telluride that you'd like to roll out to other vehicles?
The connected car features in that those will continue to cascade down.
And I think the Telluride just is a great overall vehicle from its packaging. The interior space has really improved the car's wider. It's longer.
It's really going to give that comfort to customers. We're getting a lot of features of relaxation seats in our vehicles, whether it be on our EVs, our carnival, and now the Telluride massage seats, all those type of things.
The New Telluride comes with a power telescoping steering wheel. So these are luxury touches that maybe have not traditionally been offered by the Kia brand.
And now we're bringing it to upscale the brand and elevate where we're headed.
Kia was a well-regarded early mover in EVs.
Yeah. And was pretty successful for most of last year.
And then we saw the federal tax credit sunset in September. There was a big jump and then a big dip.
Where do you think the EV market is going to settle out in 2026?
I think in summer of 2025, we saw a lot of people get pulled forward knowing that the tax credits were going to end.
So really last month and this month, we've seen a very soft market. It's about half of what had previously been.
I think that we will kind of maintain this level for a few months. But I do think in 2026, we'll see a couple percent rise in the share of the industry.
So historically, we might have been at 10% of the industry being EVs. We're probably running about four or five percent today.
I think next year you'll see us get back to six, seven, maybe eight percent of the industry. So it won't fully recover a bit. It will be an upward trend.
Your corporate sibling Hyundai showed off its crater off road concepts. Who knows if it will get built to come to market.
But it makes me ask the question, do you see gaps in the Kia product lineup that you think could be filled?
I think really I actually walked over and took a look at that concept vehicle today.
For many years, Kia has been taking a position of this rugged and capable SUVs.
You've seen that roll out on the X-line vehicles, the nightfall edition first, X-line and now X-Pro.
It's a space that we're well established in. We like this aggressive exterior of our vehicles.
We're seeing a lot of the competition adopt that in their SUVs.
I think as Kia moves forward, that rugged, capable SUV will continue to be a key part of our strategy.
And we'll always continue to explore what kind of markets and what we can move into in the future.
Eric Watson, thank you for being with us on automotive news.
Awesome. Appreciate it. Thanks so much.
That's daily drive for today. I'm Kellyn Walker.
Thanks to automotive news, executive producer Jake Near, as well as our own Mark Holmer and Jack Wallsworth for their reporting for today's podcast.
You can get the latest news on manufacturing, retail tech and everything happening in the auto industry at auto news.
We'll be off for the rest of the week for the Thanksgiving holiday here in the US.
We'll be back on Monday, December 1st.
We'd love to hear from you. Let us know what you think of the show on the topics we covered today.
Send us an email and daily drive at auto news.com or leave us a voice mail at 313-444-2774.
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About this episode
Kia America's Eric Watson discusses the automaker's optimistic outlook for 2026, emphasizing affordability and hybrid technology. With plans to ramp up production of entry-level models under $35,000, Kia aims to address consumer concerns about rising vehicle prices. The episode also covers Audi's significant price hikes for the Q3 model and the impact of AI on the automotive industry, including its applications in dealerships and inventory management. Watson highlights the importance of hybrids in Kia's strategy and the brand's commitment to enhancing customer experience through innovative technology.
Eric Watson, Kia America’s vice president of sales operations, joins the show to talk about the automaker’s affordability strategy and why he’s optimistic about 2026. Audi’s pared down U.S. compact crossover lineup comes with big price hikes. Plus, 2025 has been the year artificial intelligence has started making a big mark on both carmaking and sales.
