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December 18, 2024
US Auto Sales Expected To Have Banner Year in 2025: Will EVs Gain Ground?
A long-beleaguered American auto market may be seeing signs of a turnaround in 2025, at least if industry experts are to be believed.
According to a recent CNBC report, three key players in the space — Edmunds, S&P Global Mobility, and Cox Automotive — all project significant gains in terms of U.S. auto sales in 2025. While S&P Global and Edmunds predict new light-duty vehicle sales of 16.2 million units next year, Cox is a bit more optimistic, projecting 16.3 million sales.
As CNBC underscored, if these figures materialize, they would be the highest since 2019, a year in which 17 million vehicles were sold in the United States.
Auto Sales 2025: Trump Bump or Tariff Troubles?
Speculation abounds as to whether the strong closeout in auto sales for 2024 in the post-election period and the projected rebound of the auto market in 2025 are direct results of a so-called Trump bump, as Autoweek outlined.
Overall, General Motors performed the best in terms of Q4 year-over-year sales, with a projected hike of 18.5%, while Honda came in second place with an improvement of 5.9%.
While economic enthusiasm over the election results may have spurred some buyers into the market, incoming President Donald Trump has also threatened to enact significant tariffs on American trading partners Canada and Mexico. If enacted, these tariffs could represent a “radical disruption” to the U.S. auto market, according to Cox Automotive’s chief economist, Jonathan Smoke.
“We know that there are twists that could be coming with policy shifts, but some key assumptions that we’re making are that most of those shifts are likely to take time, and ahead of when they’re implemented, will actually likely drive demand to be pulled forward,” Smoke said during a virtual briefing on Dec. 17, per CNBC. He remained wary of drawing any conclusions as to whether tariffs would actually be implemented, however.
“As it relates to tariffs, specifically, we are not making any assumptions that major new tariffs will be implemented,” he continued.
EV Auto Sales Next Year Could Break Records
Despite the very real possibility that Trump could cancel the federal electric vehicle (EV) consumer tax credits (valued at up to $7,500), it looks as if EVs are set to have a banner year in 2025.
A significant 1.3 million EVs have been or will be sold in the U.S. in 2024, according to Cox projections, and Cox anticipates that 25% of new auto sales in 2025 will be electrified — meaning either full EVs or hybrid models.
Within that bracket, Tesla is finding competitors nipping at its heels. An aging product lineup — excluding the latest Cybertruck — and a growing field of hungry automakers looking for a share of the growing EV market have changed dynamics in the space.
“The top three manufacturers are Tesla, Hyundai Motor Group and General Motors, with GM having the largest increase in market share year over year at 2.7% at the brand level. Even though Tesla’s market share has declined below 50%, the Model Y and Model 3 continue to hold the top two spots,” Stephanie Valdez Streaty, Cox director of industry insights, said.
“Various other models are collectively taking away share from Tesla,” she continued.
Buying Now Might Not Be Such a Bad Move
According to Edmunds, those who are in the market for a new car should probably consider doing so sooner, rather than later. Edmunds’ director of insights, Ivan Drury, made the case for picking up a new ride before policy changes take effect under a new administration — particularly if you’re interested in an electric vehicle.
“It’s impossible to predict which policy changes might be implemented starting in January, but if you know you’re going to need a new vehicle in 2025 and prefer to hedge your bets, it wouldn’t hurt to start shopping now,” said Drury. “In particular, if you’re in the market for an EV, acting within the next month is probably a smart move.”
Discussion Questions
Will a so-called “Trump Bump” continue as regards the U.S. auto market, or is it more likely that policy changes coming from his administration hamper sales?
Will Tesla be able to stave off competitors in 2025, or will a more mature EV market see several new contenders take double-digit slices of market share?
When will EVs become the majority choice of American car purchasers, if ever, and what infrastructural considerations need to be taken into account should this develop?
Poll
Loading …BrainTrust
Verlin Youd
SVP Americas, Ariadne
Kenneth Leung
Retail and Customer Experience Expert
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
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Expect the unexpected next year. With Elon Musk driving policy and looming threats of tariffs, there is likely to be disruption enough to go around, not just for the auto industry.
Several factors will make car sales improve in 2025, including declining interest rates, lower inflation, and more than adequate inventories.
Will new car sales be dominated by electric vehicles? It is likely that EV sales will increase, but not to the point where they become the majority. There are many reasons, but here are a few:
1. Majority of consumers still have serious concerns about charging stations, the time it takes to recharge, and how inconvenient the long wait will be for long trips.
2. There is still a concern about the cost of battery replacements and the safety of batteries. We have all seen videos of lithium batteries catching fire. As of yet, nothing has been done to alleviate fears.
3. Gas-powered cars are cheaper than EVs. The preferred choice may still be hybrids.
4. It is highly likely that gasoline prices will fall under Trump’s administration. Pipelines will be reopened, and energy independence will be restored under Trump.
5. Consumers are not buying into “climate change” as a reason to buy electric cars, according to research. Too many contradictions exist.
Tesla’s growth will continue to outpace that of other brands. Many other companies have large inventories that are difficult to sell, and some U.S. companies have even said they may leave the EV business altogether.
Yes, promised tariffs will disrupt the industry, in no small part because many car parts are imported. Lower interest rates will help, but expect some sticker shock when tariffs kick in.
The biggest obstacles, from the comments I have heard, is the hit on home electricity bill, the hit on the electric grids in major metropolitan areas, and the amount of time it takes to get a full charge. I just can’t see value customers trading up to a EV- right now. Maybe they’ll have dealerships of just used EV cars… I do believe car sales will improve, but not because there will be more customers buying EV cars.
First, just the fact that the election is over has reduced some purchase anxiety and will lead to increased demand. Second, EV sales continue to increase, and the early adopter markets seem to be showing that broader adoption is ahead. Not scientific at all, but I have seen noticeably more EVs on the road here in NC, including numerous Tesla Cybertrucks (not my personal choice) and quite a few more Ford F-150 Lightenings. Third, given the developing role of Elon Musk in the Trump administration, I expect that the new president will likely favor policy that favors Musk, meaning good things for EVs and likely other automobiles in their shadow. As for me, I’m still on the hunt for the elusive 1970 Chevrolet or GMC pickup I can pay others to help me “restore”.
EV’s? Why expend so much space on what represents less that a tenth of the market? Indeed why speculate at all when we have essentially a consensus: +/- 16M…i.e. considerably less than it was few years ago (when the economy was smaller) What I expect in the auto industry over the next 4years 1month and 2 days is what I expect in every other industry (where unqualified motormouths get involved) dithering, drama and contradictory messaging.
EVs will gain ground and see growth if only because they currently represent a small slice of the market. However, many consumers still have reservations about EVs in terms of cost, range and other factors. The car market more generally will likely pick up as interest rates fall – although the Fed has just signaled that the pace of cuts is slowing. Tariffs will have a major negative impact if they are implemented – if being the operative word here.
This will be interesting to watch. The situation in Europe is interesting too.
Legacy manufacturers are struggling to sell EVs due to lack of demand – yet they are being fined if they sell too many ICEs. At the same time the finance deals being offered by pure EV manufactures (Tesla specifically) are so good that anyone making the switch to and EV may be considered financially foolish not to seriously consider a Tesla.
There are commentators who have suggested that we now have a situation where governments have effectively tried to create a new market through legislation. But market forces are strong and many consumers are hanging on to their vehicles for longer – the average age of cars on the road in the UK is close to an all-time high.
For the UK market, it does not help that taxes on new vehicles continue to rise – for example the ‘Expensive Car Supplement’ (which adds over £2400 in car taxes over the first 6 years of a car’s life) is charged on cars over £40,000 – the price of many medium family cars – will also be charged on EVs from April. There are very few EVs priced below this level.
“As it relates to tariffs, specifically, we are not making any assumptions that major new tariffs will be implemented.” That statement makes their forecast irrelevant. The coming administration believes they are tools to spark the economic economy.
The problem is that 40% of car components are imported from Mexico alone. Every year, the automotive industry imports almost $100 billion in parts. $16 billion each from Canada and China.
Can domestic manufacturers replace those imports? Not likely. The questions will be “Do they have the capacity?” and “At what cost?”
I’m confident that President Musk will do everything he can to promote growth in EV sales in 2025. Whether that effort will be legal, ethical and beneficial to all players in the market remains to be seen.
As for the role that retailers can play, convenience retail, mass merchants, and grocery stores have the opportunity to lead in this area with recharging stations that enable consumers to recharge their vehicles while shopping and increase US leadership in the EV market by placing charging stations at convenient locations across the country, thus increasing confidence in purchasing EVs on the part of the public.
Policy often have unintended effects. Tariffs overall increases cost in the short term and supply chains will get disrupted. I still have an issue with EV mass adoption as long as the charging infrastructure is not in place and also charging times remain an issue. Easy for a knowledge worker to charge at work or at home while working, I’d love to hear more about experiences of owners who are not knowledge workers and don’t charge at home how they work around the charging schedule and availability.
EV’s will become less, not more popular. Virtue signaling with your Tesla/Rivian/whatever will be a thing of the past as the shortcomings (Range, the environmental damage they cause, etc.) become more well known.
Without tariff protection or in combination with selective favorable application of consumer tax incentives for EV purchases, Tesla’s share of new EV sales will continue to decline as it sees its overall market share shrink. As we’ve seen a multi-year shift from sedans to SUV models, the auto industry’s growth engine is EV sales. The sector is steadily marching towards the eventual dominance of EV models, with hybrid powerplant models serving as transition vehicles as necessary infrastructure investments catch up to future demand.
A significant hurdle is sticker shock. According to Edmunds, new car shoppers, on average, have a budget of $35K, compared to the nearly $48K average transaction price. Cash incentives and zero interest rates will help bridge the gap and attract buyers. Used Tesla prices are dropping significantly and becoming a more affordable alternative for EV car shoppers.
The EV market for 2025 is reading like a mixed bag. On one hand the $7,500 tax incentive will likely be pulled in a matter of months. And the healthy automaker in Toyota is doubling down on Hybrid manufacturing as a pillar in its strategy over others more focused on EV tech.
On the other hand, EV leader Tesla introduced a significantly updated Model 3 this fall, and will soon launch an updated Model Y. Both include more advanced self-driving software, improved noise reduction and road handling. As well, Tesla lit a match to Q4 sales with 0% financing deals and generous customer referral incentives. Whether they continue this in 2025 could signal or shift how other EV makers follow suit in order to stay in the game.