As we step into 2025, the automotive industry is poised for growth and transformation. Historically, the year after an election tends to see an uptick in consumer sentiment, and early signs suggest 2025 could follow suit. With Goldman Sachs economic outlook projecting 2.5% growth in the US GDP, recession fear diminished, inflation trending back to 2%, and a stabilizing labor market—this year has all the makings of a defining moment for the auto industry.
Inflation Insights: Core Services Trending back toward 2%
Source– Goldman Sachs and Bloomberg Research
Recession Insights: Declining fear
Source– Goldman Sachs and Bloomberg Research
A Look at the Factors Shaping Business—Insights from Dealers Surveyed in Q4
Source– PR Newswire and COX Automotive
A recent survey conducted shortly after the national election reflects this emerging confidence. While market conditions stabilize, U.S. automobile dealers report increasing optimism about the future. Key factors influencing their outlook include the economy and interest rates. Notably, while the economy remains the top-ranked factor, the percentage of dealers citing its influence dropped from 62% in Q4 2023 to 56% in Q4 2024, signaling that economic concerns may be easing slightly.
Gearing Up for a Stronger Automotive Industry in 2025
Building on the optimism among dealers, Cox Automotive’s 2025 forecast suggests it could be the strongest year for the market since 2019. New vehicle sales are projected to reach 16.3 million units, an encouraging 3.14% increase from 2024’s 15.9 million units, This marks the third consecutive year of growth and reflecting a steady rebound. On the retail side, used-vehicle sales are anticipated to hit 20.1 million units, the strongest performance since the record-setting year of 2021. While inventory for used vehicles at retail remains tight, the Manheim Used Vehicle Value Index anticipates historically normal growth, finishing 2025 slightly higher year over year.
Factors Driving Consumer Demand
Auto loan rates are showing signs of improvement, easing some affordability concerns. According to the 15th edition of the 2024 Car Buyer Journey Study, satisfaction with the new vehicle buying process has reached an all-time high, with 75% of buyers reporting they were “highly satisfied.”
Dealership training helps streamline the buying process, making it more efficient and enjoyable. Additionally, training helps sustain high levels of buyer satisfaction and fosters greater loyalty, driving repeat business and long-term success.
Customer Traffic and Dealer Performance Trends
Dealers are seeing mixed signals regarding customer traffic. Franchised dealerships remain more optimistic than their independent counterparts, with sentiment indicators showing steady improvement. However, in-person visits have dipped slightly, causing the Customer Traffic Index to slip from 32 to 31. On the brighter side, digital traffic is inching upward, with its score rising from 39 to 40. Dealer profitability has also seen a slight uptick, with gains across both franchised and independent dealers. However, profitability remains below the highs of 2021 and 2022.
With digital interest climbing, staying ahead means adopting tools that quickly identify and connect with high-intent shoppers. Imagine knowing exactly who’s ready to buy within 24 hours of them entering the market. Additionally, being the first to reach them. Pinpointing active buyers improves lead quality and drives showroom visits. Advanced tracking tools enable dealerships to understand buyers’ wants, deliver personalized offers, and communicate at the right time. With these strategies, dealerships can boost traffic, improve ROI, and strengthen customer satisfaction much needed in the auto industry in 2025.
Tariffs and Their Ripple Effect in the Auto Industry in 2025
Proposed tariffs from the new administration could significantly influence vehicle affordability in 2025 and beyond. Vehicle production relies on a globally integrated supply chain. Therefore, a potential 10% tariff on Chinese imports and a 25% tariff on goods from Mexico and Canada would disproportionately impact auto prices. Many components cross U.S. borders multiple times during the manufacturing process. According to Ivan Drury, director of insights at Edmunds, this unique supply chain dynamic means that tariffs could significantly raise the cost of assembling vehicles. Ultimately, increasing sticker prices for consumers.
Despite this, there’s a silver lining for car shoppers in 2025. Most vehicles arriving on dealer lots in early 2025 have already been assembled or are currently in production, so they are unlikely to reflect the impact of any new tariffs. Dealers will likely offer competitive incentives to attract buyers. The average prices remain higher than pre-pandemic levels. Yet, relative stability provides an advantage for dealers: the ability to focus on driving traffic and closing deals without significant price fluctuations disrupting buyer sentiment.
The Road Ahead
As 2025 unfolds, the automotive industry is navigating a positive trajectory. Stable economic growth and improved consumer sentiment are expected to create opportunities across new and used vehicle markets. Dealers and manufacturers are well-positioned to capitalize on these conditions, paving the way for steady growth throughout the year.
Success in this evolving landscape requires a focus on preparedness—leveraging insights, optimizing processes, and aligning strategies with market dynamics and dealership team needs. At PRO Consulting, we specialize in supporting dealerships’ growth and success with tailored solutions. Let’s work together to position your dealership for success in 2025 and beyond. Contact us for a free consultation to review your 2025 plans and uncover growth opportunities.