The new car market split: Winners, losers, and what’s next

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One of my favorite things about social media? Getting real, unfiltered insights straight from dealers.

Recently, I put out a call for a “temperature check” on the market, and over 300 dealers across the country chimed in.

The takeaways?

• Business has slowed for a lot of dealers since Q4.

• Stellantis brands are getting a lift from stronger incentives.

• In some markets, competition is getting fiercer.

Of course, seasonality plays a role—January and February are rarely strong months. But the bigger question is: what happens next?

So—I did what CDG does and dug into the data to find out…

1. Luxury buyers keep spending as mass-market buyers continue shifting their priorities.

Most measures show that wages have been rising faster than inflation for over two years—meaning many workers are earning more in real terms than they did in 2019, according to Charlie Chesbrough, Senior Director of Industry Insights at Cox Automotive.

But these results are based on broad averages.

Not all consumers have kept up with their own cost of living, and many—perhaps most—are still behind where they would be if pre-pandemic trends had continued uninterrupted.

Case in point: Deep auto loan delinquencies just hit a near 15-year high. While still not at the record high seen during the peak of the Great Financial Crisis—auto loans transitioning into 90+ days past due are up 60 basis points from 2019.

Basically—consumers are buckling under the weight of elevated costs (and probably high pandemic-era monthly car payments in some cases).

The punchline?

When loans become deeply delinquent, lenders are usually required to set aside additional reserves to cover potential defaults. This can reduce the amount of capital available for new lending... (re: why lenders are leaning on loan extensions).

Unsurprisingly—luxury car sales seem to be a bit insulated from these affordability concerns (leasing may be the exception, but more on that later). In December, sales of $80K+ vehicles jumped 37% year-over-year, with an average sale price of $102K.

At first glance—it looks like high-income buyers are shrugging off broader economic pressures, but there’s more to it...

Luxury consumers are demanding more powertrain options, cutting-edge tech, and endless customizations, per Cox Auto analysts. All of which—cost automakers time and money.

And between the lines—automakers are likely padding margins to fund the next wave of expensive innovation, making sure they don’t fall behind.

But mass-market buyers are speaking with their wallets.

Compact SUVs and midsize pickups are growing in popularity, while midsize SUVs and midsize cars are losing ground year-over-year.

And get this—the subcompact Toyota RAV4 dethroned the Ford F-150 as the best-selling car in America.

2. Inventory levels will continue forcing (some) automakers to choose between cutting prices or protecting profits.

The RAV4—sitting at just 30 days’ supply—is proving what Toyota has known for years: When you keep supply tight, you don’t need to chase buyers with heavy discounts.

Dealer POV: However—many Toyota dealers are saying inventory is too tight. But it may not be for much longer.

The automaker is urging its U.S. dealer network to get prepared for more vehicles to sell on showroom floors—with more than 20 new, refreshed, or special-edition models set to debut in 2025.   

Compare that to Ford’s F-150, which has 141 market days’ supply—dealers are swimming in unsold trucks, meaning Ford has had to ramp up incentives just to move the metal and, in some cases—cut production.

Overall—the differences between brands are night and day:

• Toyota, Honda, and Kia are keeping inventories lean, maintaining pricing power, and avoiding margin compression.

• Ford and GM are already increasing discounts, with incentives rising 1-2% year-over-year.

• Stellantis has leaned into discounting hard to clear out old stock. And it’s working.

With 96 days’ supply across the industry, automakers are at a crossroads—cut prices to chase volume or hold firm to protect margins.

The wild card? If new policy plans from the Trump administration come to pass—those decisions may be made for them...

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3. The days of easy new EV sales are likely over.

J.D. Power projects EV retail share will hold steady at 9.1% in 2025—the first time in years that growth won’t accelerate.

But this isn’t just a demand problem—it’s an economics problem.

For years, EV adoption was driven by generous tax credits and a rapidly expanding model lineup. Now, both pillars are cracking.

The big shift? The Trump administration is targeting the repeal of federal EV tax credits. While the president can’t eliminate the $7,500 tax credit outright, he can pressure the IRS to close the “leasing loophole.”

That loophole allows leasing companies to claim the credit and pass the savings onto consumers, making EVs cheaper. If it disappears?

• Lease-heavy luxury EV brands (BMW, Mercedes, Audi) could see EV lease demand fall sharply.

• Mainstream EVs lose one of their biggest affordability levers.

• Dealers would likely face higher turn times and price cuts that could erode margins.

Yes, but—word on the street is that Stellantis will guarantee applicable EV tax credit amounts on all eligible unsold in-stock dealer inventory as well as dealer orders placed for March and April production.

What does all this mean for the short term? A sales rush.

Just like buyers rushed to claim EV credits before new sourcing rules took effect in 2024, consumers may race to lock in deals before incentives vanish.

After that? EVs could hit a wall.

• Tesla’s slowdown is a warning sign. For the first time, Tesla’s U.S. sales declined in 2024. And because Tesla still accounts for nearly half of EV sales, it brings down the whole segment.

• Mass-market EVs are at risk. In 2024, mainstream EV sales surged 58% to 376,000 units, thanks to models from Chevrolet, Ford, Hyundai, and Kia. But these buyers shop on price—not ideology. If subsidies vanish—automakers will likely have to increase their incentives.

Putting it all together: There’s one thing I’ve neglected to mention that could potentially flip everything I’ve just talked about on its head…

Yep—tariffs.

Ask just about any economist, and they’ll say tariffs will push new vehicle prices up.

And sure—most automakers will probably raise prices, but the simple fact is—the majority of consumers (for the reasons mentioned above) simply can’t absorb more cost increases. Automakers know this—and it’s why General Motors is continuing to reduce inventory at international factories to help mitigate short-term impacts.

And that’s really the heart of my whole point here—the new car market is splintering into two distinct realities—one for high-income buyers and another for the rest.

But the used car market? A totally different story. Look out for that market breakdown coming to your inbox next week.

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Three opportunities hitting the CDG Job Board right now:

• Toma: Account Executive (Regional - West Coast & East Coast).

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• Watch the world’s first electric flying car hop over another vehicle as it takes flight.

• Trump administration terminates approval of New York City congestion pricing.

• Rivian expects positive gross profit in Q4 earnings report despite nearly flat deliveries.

• Nikola goes bankrupt, punctuating EV maker’s wild ride.

• Continental to cut further 3,000 jobs in R&D in automotive branch.

Thanks for reading. See you on the next edition…

—Car Dealership Guy

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