Looming tariffs on auto imports and a potential trade war are expected to lead to higher prices for consumers and tighter inventories of new and used vehicles in the United States, according to Cox Automotive’s 2025 market forecast.
Founded in 1991, Cox Automotive provides vehicle remarketing services and digital marketing software for automotive dealers, consumers, and a variety of global businesses that serve the industry.
Chief Economist Jonathan Smoke asserted that the automotive industry is at an “interesting crossroads” in the first quarter of 2025.
Smoke predicts a “significant change” in global trade after President Donald Trump’s announcement of a 25 percent tariff on auto imports aimed at generating $100 billion in tax revenue.
These increases could soon disrupt North American vehicle production, potentially leading to a global trade war and a weaker economy, Smoke said.
“Bottom line, lower production, tighter supply, and higher prices are around the corner, reminiscent of 2021” during the COVID-19 pandemic. Uncertainty could make it even worse,” Smoke said.
“We’re not there yet but we’re a week away from moves that make the dark side more likely and in the meantime we’ve seen uncertainty grow dramatically over the last six months.”
A potential correction in the stock market and rising interest rates could further reduce demand, he noted.
In the short term, Smoke anticipates potential production delays and disruptions affecting auto manufacturers within weeks, including a 30-percent decrease in production within a week after tariffs are implemented.
“I suspect if we did a poll survey right now, we'd see nervous optimism. The opportunity is still there, but storm clouds are forming on the horizon,” Smoke said.
In the long term, the auto industry could face reductions in production and deliveries, characterized by tighter supply, decreasing inventory, and average vehicle sticker price increases of around $3,000 and above.
“While we’re still uncertain about exact policy outcomes, it looks like we are headed for the highest effective tariff rate since World War II,” Smoke said.
“For the auto market, that is especially problematic as such tariffs would be highly disruptive to North American vehicle production, resulting in tighter supply, higher prices, and lower production and sales.”
EV Market Challenges
Stephanie Valdez Streaty, the director of industry insights at Cox Automotive, noted that while dealer sentiment indexes have improved from a year ago, mixed sentiments indicate that challenges persist in the EV market.“Importantly, dealers continue to view the EV tax credit favorably, citing its benefits for both dealerships and sales,” Streaty said.
“As there are suggestions that the new administration will revoke the credit, dealers clearly see it as a net positive for business, complicating any action the new administration may take.”
Cox Automotive anticipates a 12 percent year-over-over increase in new EV sales in 2025, despite an 18 percent decline in sales from the fourth quarter of 2024, Streaty said.
“We are still bullish on EV sales in 2025, despite the many headwinds—the potential removal of federal EV tax credits and changes possibly in emission policies.”
“Potential tariffs on imported EVs and components will add complexity to EV production and sales. And despite improvements, the public charging network still faces significant challenges, which can deter potential buyers.”
Although Tesla remains a major player in the EV market, its sales volume peaked in 2023 at around 671,000, while its market share has been declining since 2020 to less than 50 percent, Streaty said.
Similarly, brand consideration reached its peak in 2021 and has continued to decrease, she said.
“Now, Tesla has been dominating the headlines lately, and it’s no surprise that everyone has questions about Tesla sales and the influence of Elon Musk,” the company’s co-founder, CEO, and head of the Department of Government Efficiency under Trump, Streaty said.
Streaty credited Tesla with bringing the electric vehicle (EV) market into the mainstream and establishing a benchmark for innovation.
However, the company is currently facing significant challenges in maintaining its market position, despite Musk’s involvement with the government.
Streaty pointed out that these challenges include increased competition, an outdated product lineup, and economic factors that are affecting consumer purchasing power.
“We believe without a significant change in strategy to develop new products with widespread appeal, Tesla’s high watermark as an Automator may be in the past,” Streaty said.
Interest in purchasing a Tesla has declined from 16 percent in 2021 to 10 percent in 2023, and further to 9 percent in 2024, she noted.
Tesla’s share of used listings increased by one percentage point to 40 percent in 2025, indicating that the rise in Tesla EV listings is partly due to greater product availability among all EVs, Streaty said.
“Still, it’s undeniable that Elon Musk is an influential factor whose actions are impacting the brand’s image and sales,” she added.
Uncertainty Over Tariffs
Charlie Chesbrough, senior economist for Cox Automotive, highlighted new vehicle sales prospects for 2025, with volume estimated at 15.6 million to 16.3 million compared with 15.9 million in 2024.He said that the effect of tariffs on vehicle inventory is still uncertain and unpredictable.
While expectations for sales growth were positive in 2024, “all that has changed in recent weeks” with the likelihood of tariffs, he said.
“The whole industry is now on pins and needles waiting to see what will happen on April 2 when tariffs are set to begin,” Chesbrough said.
“Besides nearly certain higher prices, fears regarding possible supply chain disruptions, financing issues, and recession are now in the air.”
Forecasting the new vehicle market for 2025 is particularly challenging due to uncertainty about the occurrence and duration of potential tariffs, Chesbrough said.
“However, we do know that prior to the tariff talk, the new vehicle market was looking at another year of sales growth” of 1 to 2 percent year over year.
Tax Season Impacts
Jeremy Robb, the Senior Director of Economic and Industry Insights at Cox Automotive, reported that used car sales increased by 9 percent in the first quarter of 2025.“More and more consumers continue to cite affordability as a key consideration to choosing a vehicle to purchase, whether that’s new or used,” he said.
“One of the primary factors for used vehicle sales, especially at this time of year, are tax refunds. Many consumers have historically relied on those refunds to use as down payments on purchasing a vehicle—and the used vehicle market benefits greatly from that.”
Smoke stated that due to risks and uncertainties in the broader market, complicated by the threat of tariffs and a possible trade war, a single forecast “just won’t cut it.”
“The disruptions and heightened uncertainty caused by such tariffs could result in the first quarter actually turning out to be the high point for the year,” he said.
