Dealers are still facing challenges in filling seats as 2025 approaches its end. Of the few manufacturers that continue to disclose their monthly sales figures, only a small number had any reasonably positive news to report. With escalating prices and a progressively uncertain economic climate, 2025 is set to conclude quietly rather than with a flourish.
Earlier this year, manufacturers mitigated the early signs of a sales downturn by avoiding tariffs with incentive initiatives aimed at keeping sales prices stable. Both Ford and Stellantis reinstated their employee pricing schemes to counter rising expenses, with the latter also relying on price reductions and extra incentives to facilitate sales. However, following a surge in dealership visits to capitalize on EV and PHEV tax credits that were eliminated in September, the number of car buyers has significantly decreased in October and November.
Let’s begin with the positive news:
- Toyota – Toyota and Lexus achieved a cumulative volume increase of just over 2.5% for November. The company remains nearly 8% ahead for the year, and any positive outcome is merely a bonus. To dip below its 2024 sales figures, Toyota would need to essentially shut down operations for the remainder of 2025. That’s unlikely.
- Hyundai/Kia – Hyundai and Kia experienced nearly opposing outcomes in November. Hyundai ended slightly lower than last year, while Kia recorded a marginal increase. Much like penalties against rival NFL teams, the two statistics canceled each other out, leaving them flat year-over-year. However, growth is growth, and with Kia surpassing its 2024 figures, it marks last month as its best November on record in the United States.
- Ford – Similar to the Koreans, Ford did not find nor lose a statistically meaningful number of customers in November. Its sales have technically decreased this year by a mere 40 units (out of 156,000).
Now, for the less favorable news.
- Honda – Ouch. Honda attributed its late-year decline to supply chain issues, and it was substantial—15%. Keep in mind, the company was far from fully committed to EVs. It had only two—one Honda model and one Acura—and neither is accountable for November’s decline. HR-V, CR-V, Odyssey, Accord, Civic, Pilot and Ridgeline all fell between 5 and 27 percent in November. The solitary silver lining? Passport sales rose by 50%.
- Subaru – Although Subaru sold a significant number of its Solterra EVs earlier this year, this is another automaker that cannot attribute its challenges to the EV credit. Subaru saw a decline of over 9% in November (following a similarly disappointing October) and like Honda, there were no simple culprits to point to. Each model the company offers declined in November.
- Volvo – Unlike some counterparts here, the Swedes have embraced electrified powertrains more aggressively. Volvo described the U.S. market as “subdued” following a 10% drop in November.
We do not anticipate any additional November figures at this stage; other manufacturers save their reports for quarterly updates. Return here in the first week of January for a summary of 2025 sales across the industry.
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**Q4 Auto Sales Forecasts Point to Significant Decline**
As the automotive sector nears the fourth quarter of the fiscal year, forecasts indicate a considerable drop in auto sales, raising alarms among manufacturers, dealers, and investors. Various factors contribute to this expected decline, including economic conditions, disruptions in the supply chain, and evolving consumer preferences.
**Economic Factors**
The wider economic environment significantly influences consumer buying habits. Escalating inflation and rising interest rates have contributed to higher financing costs for prospective car buyers. As consumers contend with stricter budgets, discretionary spending on major items such as vehicles typically diminishes. Analysts foresee that this economic pressure will result in a stark decline in auto sales relative to earlier quarters.
**Supply Chain Challenges**
The automotive industry continues to confront supply chain issues that have lingered since the onset of the COVID-19 crisis. Shortages of essential components, including semiconductors, have hampered production capabilities for numerous manufacturers. Consequently, inventory levels remain low, restricting vehicle availability for consumers. This scarcity may lead to increased prices, further deterring potential buyers and adding to the anticipated drop in sales.
**Changing Consumer Preferences**
In recent times, consumer preferences have shifted towards electric vehicles (EVs) and more eco-friendly transportation alternatives. While this shift is generally beneficial for the industry, it has posed challenges for traditional manufacturers still heavily reliant on internal combustion engine vehicles. As consumers increasingly seek out EVs, producers may find it difficult to fulfill demand while also managing their existing stock of gasoline-powered automobiles. This mismatch might further intensify the decline in overall auto sales.
**Market Competition**
The competitive environment of the automotive industry is also transforming. New players, especially in the EV segment, are gaining momentum and attracting consumer attention. Established manufacturers are under pressure to innovate and adjust to these changes, which can redirect resources and focus away from traditional sales approaches. As competition heats up, some manufacturers may see a downturn in sales as consumers lean towards newer, more technologically advanced options.
**Outlook and Implications**
Industry experts anticipate that the decline in Q4 auto sales could have significant consequences. Manufacturers may have to revise production schedules, rethink pricing strategies, and enhance marketing initiatives to stimulate demand. Moreover, dealerships might face heightened pressure to manage their inventories effectively, as unsold vehicles could lead to financial strain.
In summary, the forecasts for Q4 auto sales suggest a substantial decline driven by economic factors, supply chain disruptions, shifting consumer preferences, and increased competition. Stakeholders in the automotive sector will need to navigate these obstacles prudently to minimize the impact of this downturn and set the stage for future recovery.