US new vehicle sales expected to hit highest levels since 2019 due to falling prices and rising inventories

The US auto market is poised for its strongest performance in years, with new vehicle sales expected to rise to levels not seen since 2019. Industry analysts expect a recovery in 2025, driven by improved affordability, lower interest rates and a gradual normalization of the vehicle market. stocks after years of supply chain disruptions and inflated prices.

Cox Automotive expects new light-duty vehicle sales to reach 16.3 million units in 2025, slightly ahead of forecasts from S&P Global Mobility and Edmunds, which call for sales of about 16.2 million. These estimates represent a modest increase from this year’s expected range of 15.9 to 16 million units, and mark a significant rebound from recent lows, although still below the 17 million vehicles sold in 2019.

Jessica Caldwell, chief insights officer at Edmunds, noted that while consumers still feel economic pressures, the market is becoming more accessible for shoppers. “The market has become a slightly friendlier place for car buyers than it was at the beginning of the year,” he said Tuesday.

Entry-level vehicles and affordability are the focus

One of the most promising growth areas is expected to be entry-level and affordable vehicles. Since the start of the COVID-19 pandemic, the auto industry has been grappling with high prices and limited supplies, leaving many buyers out of the market.

Edmunds reported that the average transaction price for a new vehicle in 2024 was $47,465, down slightly from $47,851 in 2023, but still a staggering 27.2% increase from $37,310 in 2019. Yes expects the trend toward more affordable vehicles will help spur sales growth, particularly among customers who have been waiting for prices to drop.

Electric vehicles continue to gain ground

Electrified vehicles, including hybrids, plug-in hybrids and all-electric models, are also expected to see substantial growth in 2025. Analysts expect all-electric vehicle sales in the U.S. to set another record in 2024, with total sales close to 1.3 million. unit. That would represent about 8% of the market, up from 7.6% last year, though still below the initial 10% target for the year.

Tesla, the dominant player in the electric vehicle market, is expected to experience its first year-over-year decline in market share since 2014. Despite this, Tesla’s Model Y and Model 3 remain the two best-selling electric vehicles. According to Stephanie Valdez Streaty, director of Industry Insights at Cox Automotive, Tesla’s share of the electric vehicle market has fallen below 50% as competition from other automakers intensifies.

“The three major manufacturers are Tesla, Hyundai Motor Group and General Motors,” Valdez Streaty said. “GM posted the largest year-over-year increase in market share, while various new models collectively chipped away at Tesla’s dominance.”

Cox Automotive predicts that by 2025, approximately 25% of all new vehicle sales will be electrified, with all-electric vehicles accounting for more than 10% of the market. However, growth in EV sales could be hindered if federal tax credits of up to $7,500 for EV purchases are eliminated, a policy change promised by President-elect Donald Trump.

Policy uncertainty under the Trump administration

Regulatory and trade uncertainties ahead of Trump’s inauguration in January could have significant implications for the U.S. auto market. In particular, Trump’s proposals to impose tariffs of up to 25% on vehicles imported from Canada and Mexico could disrupt manufacturing and supply chains, potentially reshaping the market.

Jonathan Smoke, chief economist at Cox Automotive, described the possibility of such tariffs as a “radical disruption” to the industry. However, he also expressed optimism that any major policy changes would take time to implement and could create short-term demand boosts.

“With the tariffs, we assume that no significant new policies will be implemented immediately,” Smoke said during a virtual briefing Tuesday. “If changes do occur, they are likely to take time and any short-term impact could spur demand as consumers rush to shop ahead of potential price increases.”

Price pressures and earnings of car manufacturers

While rising vehicle sales are generally good news for the industry, analysts warn that automakers’ earnings could take a hit next year due to increased incentives, rising inventories and decline in transaction prices.

“Prices are reaching unsustainable levels,” Wells Fargo analyst Colin Langan noted in a report Monday. He pointed to rising dealer inventories and increased incentives as signs that automakers are facing pressure to lower prices, a trend that benefits consumers but weighs heavily on profit margins.

Although prices remain near record levels, growth has slowed, signaling a change in market dynamics. For buyers, this is good news, as vehicles become more affordable after years of inflated prices. For automakers, however, reduced pricing power could mean tighter margins and more competition.

Looking ahead

As we enter 2025, the US automotive market faces a mix of opportunities and challenges. Improving affordability and rising inventory levels are expected to drive increased sales as the growing adoption of electric vehicles continues to reshape the industry landscape.

However, regulatory uncertainties under the new Trump administration, along with pricing pressures and changing consumer preferences, could create turbulence for automakers in the coming months.

For now, the industry is cautiously optimistic, with analysts predicting that 2025 will mark a new high point for vehicle sales since the pandemic upended the market, though not without its share of bumps ahead along the way .