2025: A Brighter Outlook for U.S. New Vehicle Sales
Industry analysts forecast a positive trajectory for the U.S. new vehicle market in 2025. S&P Global, Edmunds, and Cox Automotive anticipate a year-over-year increase of 2.5% or less, achieving the industry’s strongest performance since 2019.
This growth is projected to stem from the continued normalization of vehicle inventories, manufacturer incentives and discounts, and more favorable financing and loan rates.
Electric Vehicles Lead the Charge
Electric vehicles (EVs) are expected to continue their impressive growth, setting another sales record in 2024. Cox Automotive projects total sales volume nearing 1.3 million, representing approximately 8% of the market. This is up from 7.6% last year.
Growth is expected in lower-priced vehicles, addressing the years of higher prices and lower inventories since the COVID-19 pandemic.
Market Dynamics and Key Players
Edmunds reports the average transaction price for new vehicles in 2024 at $47,465, a slight decrease from $47,851 in 2023, and a significant jump from $37,310 in 2019.
Electrified vehicles, including hybrids and plug-in hybrids, are also anticipated to experience growth. Cox anticipates that roughly 25% of new vehicle sales in 2025 will be electrified, with all-electric models exceeding a 10% market share.
Despite an expected decline in Tesla’s sales, the brand still holds strong. Stephanie Valdez Streaty from Cox noted that Tesla, Hyundai Motor Group, and General Motors are the top three manufacturers. GM has seen the largest increase in market share, with Tesla’s Model Y and Model 3 still holding the top two spots.
Potential Risks and Uncertainties
Analysts caution that uncertainties could impact the market. The potential end of the federal consumer credit for EV purchases, which could impact sales, is a concern. Additionally, regulatory shifts and tariff threats, particularly from potential policy changes, are potential disruptors. Jonathan Smoke, chief economist at Cox Automotive, highlighted tariffs on vehicles from Canada and Mexico as potentially “a radical disruption” to the market.
Impact on Automakers
The projected increase in sales could present a mixed bag for automakers’ earnings. Analysts point to higher incentive rates and declining pricing as potential factors that might weigh on profits, even with higher sales volumes. Wells Fargo’s Colin Langan noted rising inventories, increased incentives and less pricing power for automakers as key concerns. While this easing of prices benefits consumers, it creates margin challenges for manufacturers.
