In the ever-evolving landscape of the automotive industry, a significant shift is currently underway, characterized by dwindling supplies of both new and used vehicles across the United States. This decline is not merely a statistical anomaly; it reflects broader economic trends and consumer behaviors that are likely to shape the market for years to come.
Recent data from Cox Automotive reveals a startling decrease in the days’ supply of new vehicles, plummeting from 91 days at the start of March to just 70 days by the end of the month. For context, a typical decline in a stable market usually hovers around 5 to 7 days. This stark drop highlights the urgency felt by consumers who are eager to purchase vehicles before potential price hikes linked to tariffs take effect. “Consumers are trying to get ahead of tariffs on imports,” stated Jonathan Smoke, chief economist at Cox Automotive. This proactive purchasing behavior underscores the anxiety surrounding impending tariffs, particularly the 25% levied on imported vehicles by the previous administration, which could reshape the landscape of car buying.
The implications of these tariffs are multifaceted. While new vehicle sales have surged 22% above last year’s seasonally adjusted pace, and used vehicle sales have seen a 7% increase compared to 2024, there is a looming concern that this trend may not be sustainable. Analysts warn that once automakers deplete their tariff-free inventories, sales could decline sharply. Auto advisory firm Telemetry predicts that the anticipated rise in production costs and parts could lead to a staggering 2 million fewer vehicles sold annually in the U.S. and Canada. The increased costs tied to these tariffs are expected to be passed on to consumers, potentially dampening demand.
Many automakers had strategically built up inventories of imported vehicles before the tariffs were enacted on April 3. However, as the reality of these tariffs sets in, companies are adjusting their strategies. For instance, Jaguar Land Rover has halted imports entirely, while General Motors is ramping up production at its U.S. plants, including a notable increase at a pickup truck facility in Indiana. This move reflects a calculated response to the shifting economic environment, as automakers strive to balance supply with the realities of consumer demand and regulatory pressures.
Dealerships are also feeling the impact of these changes. Ryan Rohrman, CEO of Rohrman Automotive Group, noted that April has started off strong, driven by a combination of tariff-related concerns and improved inventory levels compared to previous years. His observation that “business right now is actually pretty strong” indicates that, at least for the moment, consumer demand remains robust. However, as he pointed out, the next 60 to 90 days will be crucial in determining how the market will respond to the evolving tariff landscape.
Interestingly, some automakers, such as Ford and Stellantis, are leveraging the situation to clear out existing inventories by offering enticing “employee pricing” deals. Nick Anderson, general manager of a Ford dealership in Missouri, shared that the unique discounts combined with consumer anxiety about rising prices have attracted a more price-conscious clientele. While sales volume remains strong, Anderson noted a dip in gross profits, indicating that the changing demographics of car buyers may be reshaping dealership economics.
As political figures continue to discuss potential interventions in the auto market, with recent remarks from former President Trump expressing a desire to “help some of the car companies,” the future remains uncertain. Stellantis Chairman John Elkann echoed these sentiments, highlighting that the dual pressures of tariffs and emissions regulations are putting both the U.S. and European car markets “at risk.”
In conclusion, the current dynamics of the automotive market illustrate a complex interplay of consumer behavior, regulatory changes, and economic pressures. As the days’ supply of vehicles continues to dwindle, both dealers and consumers must navigate a landscape marked by uncertainty and opportunity. The coming months will be pivotal in determining not only the health of the automotive industry but also the broader economic implications of these evolving trends.
