Dealers are bracing for a collision when Trump Admin. tariffs take full effect this summer and pre-tariff inventory is completely gone, says Charlie Chesbrough, senior economist for Cox Automotive.
“We’re kind of waiting on pins and needles to see what it’s going to mean for all of us,” he says during a recent webinar hosted by the American International Automobile Dealers Assn.
Chesbrough illustrates the situation with an image of the RMS Titanic, labeled “New Vehicle Sales” bearing down on an iceberg labeled “Summer 2025.”
“It may end up being a big iceberg,” Chesbrough says. “All us analysts who are following the industry are just waiting to see how does the economy, and how do vehicle buyers, react over the next couple months, because things are going to start to change out there.”
Lower Sales Forecast
Namely, he says elevated prices and interest rates, vs. lower inventory, incentives and consumer confidence suggest depressed new-vehicle unit sales. In the recovery from the COVID-19 pandemic, there was enough consumer demand to more than offset the loss in volume, and per-unit profits soared. Today, that’s not so certain.
Cox Automotive says the low end of its 2025 U.S. light-vehicle sales forecast falls to a range of 15.3 million to 16.3 million, with a “baseline” forecast of 15.7 million. In March, the Cox sales forecast for 2025 was a range of 15.6 million to 16.3 million.
“Once the president started announcing his new tariff policy, we’ve seen consumer sentiment drop like a rock,” Chesbrough says. “This is important because we need confident consumers to go out there and take that $50,000 loan to buy a new automobile. If people are not confident about the economy and their own economic futures, they’re much less likely to make a big purchase like an auto. So, this is a critical factor for us.”
Dealers See It Coming
In a dealer sentiment survey for the second quarter of 2025, Cox Automotive reports that “the economy” is the dealers’ No.1 answer to the question, “What are the factors holding back your business?”
Specifically, 51% of dealer respondents cited "economy" in Q2 2025, making it the highest-ranked response. A year ago, "interest rates" were ranked No. 1, with 59% support.
“Interest rates” are the No.2-cited concern for Q2 2025, at 42%. Previously, it was the other way around. For the first quarter of 2025, interest rates are No. 1 at 52%, and the economy is No. 2 at 45%, according to Cox Automotive reports.
In the Q2 2025 poll, 33% of dealers cite “tariffs” as a factor holding back business. That number is just 7% in the first quarter, and 3% in Q2 2024. “Tariffs went from being a non-issue in the first quarter to suddenly a major issue…in our current quarter,” Chesbrough says.
