Texas is closing in on California as the largest vehicle market in the U.S., with the Lone Star State becoming increasingly important to automakers and dealers beyond its pickup-truck roots.
The details: Long considered the epicenter of American car culture, California is steadily losing ground to Texas in new-vehicle sales, according to a new JD Power report.
California's share of U.S. light-vehicle retail sales has fallen from 12.5% to 11.4%, while Texas' share has grown from 9.3% to 10.8%.
The gap between the two states has narrowed from 3 percentage points to just 0.6 points in less than six years.
Based on a 16.3 million-unit retail sales forecast this year, California is projected to lose roughly 158,000 sales compared with 2019 levels, while Texas is expected to gain about 197,000.
Adding to this, Texas has already led the nation in new-vehicle dollars spent for three consecutive years, driven in part by strong demand for high-priced pickup trucks.
Still: Texas' growing influence extends beyond trucks and population growth, even as its population approaches 32 million compared to California's roughly 39 million.
Pickups account for 27% of new-vehicle sales in Texas, meaning nearly three-quarters of the market consists of other vehicle segments.
Texas buyers tend to favor mainstream brands more than California consumers, who show higher lease penetration and stronger preferences for luxury vehicles, according to J.D. Power.
Why it matters: Texas' rise reflects a broader shift in where automotive growth is occurring in the U.S, with the state's growing share of sales making it an increasingly important market for inventory allocation, retail strategy, and future investment.
Between the lines: The state’s growing automotive influence is also reshaping financing and F&I dynamics compared with California.
Texas tax policy makes leasing comparatively expensive, resulting in 69% of buyers paying cash or arranging outside financing—23 percentage points higher than California, where leasing remains a key purchase channel.
Average loan terms in Texas are six weeks longer than in California, while Texas dealers generate about $2,200 in F&I revenue per vehicle sold—roughly $400 more than dealers in California.
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Also worth noting: Automotive investment in Texas continue to accelerate, with Toyota recently filing plans for a $2 billion assembly-line project and automotive technology supplier Valeo breaking ground on a new $225 million manufacturing facility in the state.
What they’re saying: “California has been the spiritual center of car culture in the U.S. since the 1950s,” reads the JD Power report. “…Not only did many major automotive brands set up shop in California, but the Golden State also welcomed hybrids and then EVs with open arms far sooner than the rest of the country. Now all that is shifting. If current trends continue, Texas will not only surpass California in sales but also redefine the characteristics of the nation’s automotive market.”
Bottom line: Texas is emerging as the U.S. industry's new center of gravity, with its influence extending beyond vehicle sales to financing, manufacturing, and consumer buying behavior. As the gap with California continues to narrow, dealers and automakers may increasingly look to Texas to help shape future retail and product strategies.
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