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3 Min Read
Incentives will also shrink, analysts predict.Getty Images
President Trump’s decision to slap 25% tariffs on import vehicles starting this week has led Cox Automotive to lower its 2025 sales volumes to a range of 15.6 million to 16.3 million, vs. an earlier forecast of 16.3 million. For context, 2024 total light-vehicle sales were 16.0 million, an increase of 2.5% vs. 15.6 million in 2023. That’s total U.S. new light-vehicle sales, including retail and fleet.
The updated Cox Automotive forecast for U.S. used-vehicle sales is now in a range of 37.6 million to 38.0 million. The high end of that range is an increase over the previous Cox Automotive forecast of 37.8 million, but the low end of the range is lower.
“Tariffs will be highly disruptive,” says Jonathan Smoke, chief economist for Atlanta-based Cox Automotive, during a recent webinar to review the market through the first quarter of 2025 and to update 2025 forecasts. “Lower production, together with tighter supply and higher prices, are around the corner.”
Higher Costs
Of course, that’s assuming the Trump administration sticks with tariffs on imports from Mexico and Canada, which have already been postponed or revised at least twice before earlier deadlines took effect.
“Half of the affordable vehicles on the U.S. market are made in Mexico and Canada,” Smoke says, so tariffs likely will have a big effect on affordability where it counts the most.
Collateral Damage
Increased costs for OEMs and suppliers spell higher wholesale prices for new and used vehicles, Smoke says. Lower production and reduced dealer inventory result as OEMs cut production or even eliminate some high-tariff, imported models in the U.S. market, he says.
The American Automotive Policy Council, a trade group representing General Motors, Stellantis and Ford, says it supports raising production and creating jobs in the U.S. but asks the Trump Admin. to avoid raising consumer prices. In turn, Trump has cautioned manufacturers from doing the same.
“In particular, it is critical that tariffs are implemented in a way that avoids raising prices for consumers and that preserves the competitiveness of the integrated North American automotive sector that has been a key success of the President’s USMCA (United States Mexico Canada) agreement.” says Matt Blunt, president of the group.
Cox Automotive also expects its Manheim Used Vehicle Value Index to increase considerably more than previously expected in 2025. The new forecast is an increase in the range of 2.1% to 2.8% comparing December 2025 vs. December 2024. Its earlier forecast was an increase of 1.4%.
Also in the webinar, Charlie Chesbrough, senior economist for Cox Automotive, says dealers for brands with above-average inventory, such as Ford, Mazda, Hyundai, Jeep, Ram and Nissan, may find higher inventories to be a “silver lining” in light of tariffs.
Brands with below-average inventory, such as Toyota, Honda and Subaru may see inventory get even tighter, he says.
Lower Spiffs
As an indirect result of tariffs, Chesbrough says manufacturers, on average, are lowering customer incentives. Incentives were making a comeback as inventory grew. If tariffs are enacted, inventory will likely fall.
The average new-car incentive for the first quarter is an estimated 7.1% of the Manufacturer’s Suggested Retail Price, Chesbrough says. That’s down from a recent high of 8% in the fourth quarter of 2024 but higher than the recent low of around 2% in the fall of 2022, when a computer chip shortage made inventory scarce.
Lower incentives cut both ways for dealers. Higher per-vehicle revenues could be good news. But higher prices and lower consumer confidence could cut consumer demand.
Incentives are “no longer moving in the buyer’s favor,” Chesbrough says. “Price strength is no longer falling. It is negotiation and discounting that are in decline.”
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