The U.S. auto industry is navigating one of its most complex landscapes in years, part multi-level chess game, part balancing act between supply, policy, and affordability.
Key signals and the auto industry’s current vibe
From Cox Automotive’s Q3 2025 Industry Insights & Sales Forecast Call (held Sept 25):
- Q3 brought resilient demand and record EV sales ahead of incentive expirations.
- Q4 looks softer as tariffs and tighter supply push prices higher.
- 2026 should be modestly stronger—if the labor market holds.
The macro dashboard: mostly yellow, not red
- Growth: Cox expects ~2% GDP for Q3; Q4 weaker, but “no more negative quarters.”
- Jobs: Unemployment at 4.3% and expected to drift only slightly higher. The watch-item is slower hiring amid AI productivity gains and lower immigration.
- Rates & credit: Fed cuts haven’t yet lowered auto APRs; incentives on new loans tightened in September. Credit is flowing—better for high-score buyers—but trending tighter. Both gauges sit at yellow with potential to improve by spring.
- Consumer: Real incomes are still growing; demand durability depends on job stability.
Tariffs & pricing: no free lunch
New trade frameworks add cost throughout the supply chain:
- Imported vehicles: ~$5,500 higher average cost.
- US-assembled: +~$1,000 (parts, initially) + ~$800 (steel & aluminum).
- MSRP outlook: Cox sees +4–6% (possibly 8%) average inflation by this time next year—on top of a pre-COVID trend that was already ~3%/yr.
Expect more “shrinkflation” (feature deletions, trim reshuffles) and selective MSRP increases as OEMs defend margins. Affordability pressure migrates downstream—to dealers, suppliers, and ultimately consumers.
New-vehicle sales: big players get bigger
- 2025 forecast raised to 16.1M (from 15.7M), with Q4 deceleration as tariff costs show up and EV demand cools post-credits.
- Q3 leaders:
- GM: >700k units, +7% YoY; YTD +10% led by Equinox & Traverse.
- Toyota: +17% YoY in Q3; YTD +8%+ on Tacoma & Sienna strength.
- Stellantis: –0.6% YoY in Q3; YTD –8%, share down ~1 pt; Jeep Cherokee refresh helps late Q4/2026.
- Tesla: –6% YoY in Q3 but +9% QoQ; share –0.5 pt YTD; likely softer Q4 after the EV rush.
- Concentration trend: GM, Toyota, Ford, Hyundai—top four up 9% YTD while the rest are down 2%. Broad portfolios are winning.
Supply, incentives, and price: upward pressure returns
- Supply: ~2.8M units in stock/in-transit (–4% YoY), 76 days of supply (–11% YoY). Tighter inventories reduce deal pressure.
- Incentives: Averaged 7.2% of ATP in August. Post-tariff pullback hasn’t materialized—yet.
- Prices: $49,077 ATP in August (near long-term high). Up 0.6% YoY—highest pace in ~2.5 years—and likely to rise faster as 2026 models (built post-tariff) hit lots.
EVs: a record quarter, then a hangover
- Q3 milestone: ~410k EVs and ~10% share—a record—powered by pre-expiration incentive buying.
- Leasing = the EV unlock: EV lease penetration surged (industry example rates >50% recently), tripling the broader industry average and bridging affordability. Without federal support, lease penetration should ease.
- Inventory: EV day-supply fell to ~62 days in August—below ICE (~78 days)—tightening fastest among major segments.
- Near-term: Expect Q4 EV cooldown as incentives lapse, with hybrids and PHEVs absorbing demand.
Hybrids
Hybrids and plug-in hybrids are quietly reshaping the mix. One in four vehicles sold now has an alternative powertrain. Toyota leads in hybrids with 49% share; Jeep leads plug-ins at 25%. These technologies are acting as bridges for consumers not ready to go full EV.
Used market: fundamentals remain solid
- Mannheim wholesale values ran above 2024 and long-term norms after a spring spike; seasonal slippage is milder than usual.
- Lease-return mix flips ahead: by 2027, lease returns shift to ~16% EV / 5% PHEV / 6% HEV / ~72% ICE (vs. historically ~95% ICE). As positive equity evaporates and turns negative, returns rise, auction volumes increase, and pressure builds on wholesale values in returning segments.
- Net-net: Used stays stable near current index levels; affordability keeps pushing buyers down-market.
Cox Automotive’s retail outlook line (next 12 months)
- New sales: +1.5%
- Retail new: +1.0%
- Used: +2.3%
- Retail used: +2.0%
- Total retail: +1.5%
Q4 sets the tempo for 2026, with modest upside—but only if OEMs don’t overbuild and trigger heavier incentives.
Finished Vehicle Logistics Implications (AG view):
- Flex capacity down in Q4, be ready to pivot up by spring.
- Win on on-time, claim-free delivery—not rate cuts.
- Treat EV handling (securement, dwell checks, winter routing) as a core competency.
- Stand up fast-cycle lanes for growing auction/recon flows.
