U.S. Light Vehicle Market: Sales Disappointing Everybody

Warren Browne is an adjunct professor of economics and trade and Advisory Board member in the College of Business and Information Technology at Lawrence Technological University and is president of WP Browne Consulting. As an automotive analyst, he recently reviewed both industry performances of 2024 products and previews of 2025 products.

2024: Fifth Year of Disappointing Performance

Automotive suppliers have been looking for manufacturers to sell 17 million light vehicle sales in the United States since 2019. Unfortunately, 2024 and 2025 will fall short of that sales mark again and will take until at least 2028 to get close to such level.

At the beginning of this calendar year most analysts, including WP Browne Consulting, had hopes that sales would at least get above 16 million. Overall U.S. economic growth, coupled with record levels of employment, were higher than economists’ predictions, along with many new entries being launched throughout the year, marketing mavens anticipated consumers would return to dealer showrooms for a purchase refresh.

However, consumers found significantly increased vehicle prices and interest rates that made financing and leasing less attractive and returned home waiting for a better deal.

Overall, light vehicle sales are expected to be 15.71 million this year, a paltry 1.4% increase. Sales growth in Q3 was negative, and overall sales increases were fueled by import models from brands such as General Motors, Toyota, Jaguar, Land Rover, Hyundai and Subaru. Wellstyled choices, like Buick Envista, Chevrolet Trax, Hyundai Kona and Ioniq 5, Subaru Forester, and Toyota Crown are driving a 7% increase in overall imported sales.

There will be a number of domestically produced models that will have sales growth in excess of 20%! Honda Civic and Toyota Corolla will boost their division’s passenger car mix. Ford Transit van and Maverick pickup, and Toyota’s RAV4 will show similar increases due to their hybrid/electric powertrain alternatives.

Battery-electric vehicle sales will achieve 1.32 million sales in 2024, a level that is below the cumulative sales proclamations provided by CEOs last year. On a positive note, the sales growth will come from models other than Tesla. The bad news: none of the 82 battery-electric models sold by Tesla’s competitors sells more than 50,000 units. (Tesla’s Model Y will sell more than 400,000). Part of the problem stems from new models being offered without base or mid-level trims—an additional form of sticker shock.

*All other battery-electric models. C.Y. Excludes all hybrid/PHEV model trims

Source: Light Vehicle Sales History: St. Louis Federal Reserve

2025: Light Vehicle Sales Outlook

Next year will reveal limited light vehicle sales progress. Key interest rates will remain above 2019 levels and vehicle prices are expected to increase by 3.9%. GDP growth will slow from the robust 2.5% expected this year, no matter who is president. Light vehicle sales will increase to 16.15 million units which will support an increase in North American production. Key assumption: there will be no increases in tariffs and a new car loan rate of 5.5%, roughly 2pts. lower than today.

There will be an additional 36 battery-electric vehicles launched next year (many in the 4th quarter). In addition, some existing models will add lower priced trims to attract more customers. To take advantage of the Inflation Reduction Act, five models will flip to North American production during the year: Hyundai Ioniq 5, Kia EV9 SUV, Subaru and Toyota BEV crossovers, and Audi’s Q4 e-tron. Battery-electric sales will increase to 1.75 million units with Tesla maintaining a significant sales lead with only 5 models. Unfortunately, production of all battery-electric models will not be enough to get capacity utilization above 60%.

U.S. Market: Potential Disruptions in 2025

Brands with a broad portfolio will continue to be successful. Passenger cars continue to capture 20% of light vehicle market sales. This is significant moving forward given the dominance of Asian and European brands in the sector. With the elimination of Malibu, Camaro, and Challenger from the market, the Detroit 3 will continue to face market share pressure. Collectively, the Detroit 3 have handed over the U.S. car market to foreign brands.

Protectionist measures will continue to be put forward by members of Congress–no matter who is elected president of the United States. Tesla will come clean on their additional manufacturing facility in Mexico for 2027. This capacity expansion will keep Tesla as the largest battery-electric seller through the end of the decade. In fact, it will take 3 more years before any of Tesla’s competitors have an entry that sells more than 100,000 units in the United States.

Regular and plug-in hybrids, initially dismissed by General Motors but embraced by Toyota and Ford, will continue to increase sales. These models provide customers with better pricing and value than the existing crop of battery-electric vehicles. They are also a path to meeting the EPA’s CO2 standards.

Significant 2025 Model Introductions

Next year can be exciting for consumers looking for choices. New sheet metal will be launched by all of the major brands. These are a few to keep your eyes on (rank ordered by projected sales volume):

• Kia K4 passenger car. This replacement for Forte has a base price of $21,990 and gets 40 mpg on the highway with a 2.0-liter engine (Sedan).
• 2025 K4 Hatchback
• Charger / EV. The two and four-door models could be a potential hardware configuration for future muscle cars: high gasoline horsepower and electric in the same vehicle.
• Chrysler Airflow EV.
• Jeep Recon EV.
• Toyota bZ5x three-row EV. Mid-year alternative to Highlander hybrid. Toyota is still trying to figure out the pricing relationship of comparable battery-electric and hybrid vehicles.
• Kia EV3. Mid-2025. Initially imported.
• Cadillac Escalade IQ EV.
• VW ID Buzz.