A sales sign is seen at Serramonte Subaru car dealership in Colma, California.
Stephen Lam | Reuters
DETROIT – U.S. new car sales are expected to rise next year to their highest level since 2019, led by lower interest rates and better affordability, according to industry analysts.
Cox Automotive expects new light-vehicle sales to reach 16.3 million in 2025, slightly higher than S&P Global Mobility and Edmunds forecasts of about 16.2 million sales next year. Such sales would rise from expectations of 15.9 million to 16 million this year and mark the highest results since around 17 million in 2019.
That would equate to an expected sales gain in new cars and trucks of 2.5% or less. The increase is expected to be driven by continued 'normalization' of vehicle inventories, incentives/rebates from automakers and easing of financing and lending rates.
“Consumers are still feeling the pressure, but the market has become a slightly friendlier place for car buyers than it was at the start of the year,” Jessica Caldwell, Edmunds' chief insights officer, said in a Tuesday news release.
One of the biggest growth markets is expected to be the cheaper entry-level models. The sector has faced years of high prices and lower inventories since the coronavirus pandemic.
Edmunds reports that the average transaction price for new vehicles in 2024 was $47,465, down 0.8% from $47,851 in 2023, and up 27.2% from $37,310 in 2019.
EVs
Another expected growth area, according to analysts, remains electrified vehicles, including hybrids, plug-in hybrid and fully electric models.
According to Cox, U.S. sales of all-electric vehicles are expected to set a new record in 2024, with total sales volume approaching 1.3 million. That would mean a market share of roughly 8%, up from 7.6% last year, but lower than expectations of 10% earlier this year.
That's despite a predicted year-on-year decline for the US EV leader Tesla's turnover for the first time since 2014.
“The three largest manufacturers are Tesla, Hyundai Motor Group and General engineswith GM having the largest year-over-year market share increase at 2.7% at the brand level. Although Tesla's market share has fallen below 50%, the Model Y and Model 3 continue to hold the top two positions,” Stephanie Valdez Streaty, Cox director of Industry Insights, said Tuesday. “Several other models are collectively taking market share away from Tesla.”
Cox expects that by 2025, approximately 25% of new vehicle sales will be electrified, including more than 10% penetration for fully electric models.
Valdez Streaty and others warned that electric car sales could be weaker if federal consumer credits for car purchases worth up to $7,500, which the Trump administration has pledged to eliminate, come to an end.
'Radical disruption'?
Analysts warned that regulatory uncertainty ahead of President-elect Donald Trump's inauguration could impact new car sales in the US. Most notably, Trump's tariff threats could affect auto production in Canada and Mexico.
Jonathan Smoke, Cox Automotive's chief economist, said tariffs on those countries, which Trump has said could reach 25%, would be “a radical disruption” to the U.S. new vehicle market.
Newly elected US President Donald Trump delivers remarks at Mar-a-Lago in Palm Beach, Florida, US, December 16, 2024.
Brian Snyder | Reuters
“We know there can be changes as a result of policy changes, but some key assumptions we are making are that most of those shifts will likely take time, and before they are implemented, will actually stimulate demand. be pulled forward,” Smoke said during a virtual briefing on Tuesday. “When it comes to tariffs specifically, we don't anticipate any major new tariffs will be implemented.”
The expected surge in U.S. new car sales could even be counterintuitive for some automakers' earnings next year due to higher stimulus rates and an expected drop in prices, Wall Street analysts said.
“We continue to see signs that prices are not sustainable,” Wells Fargo analyst Colin Langan said in an investor note Monday, citing rising inventories, increasing incentives, declining dealer profits per vehicle and other overall reduced pricing power for automakers.
Prices remain near record highs, but growth has slowed, which is good for car buyers but bad for businesses.