Trump’s tariff, EV orders signal uncertain year for auto market

Executive orders signed by President Donald Trump on Jan. 20 emphasized his hopes to scale back available electric vehicle subsidies and increase tariffs on products from other countries, highlighting the uncertain trajectory of a post-election auto market. [caption id="attachment_58348128" align="aligncenter" width="1562"] (Courtesy/Canva)[/caption] One of the orders, titled "Unleashing American Energy," aims, in part, to eliminate "unfair subsidies and other ill-conceived government-imposed market distortions" that favor EVs "over other technologies" and "renders other types of vehicles unaffordable." Trump signed the order just hours after giving his inauguration speech on Jan. 20, where he said, " With my actions today, we will end the Green New Deal, and we will revoke the electric vehicle mandate, saving our auto industry and keeping my sacred pledge to our great American autoworkers." There is not an EV mandate in place. However, Trump's efforts to quickly repeal federal EV subsidies could hamper automakers’ and consumers’ willingness to invest in eco-friendly vehicles. One of many, Trump also signed an executive order titled, "America First Trade Policy," which noted the potential for increased tariffs on other countries "to remedy" the United States' annual trade deficits. Changes in consumer demand and pricing could weigh on the industry in the coming year as the Trump administration rolls out its tariff policies. However, there are bright spots for the auto market this year compared with 2024, a year marked by weakened consumer demand and sluggish sales, driven by election uncertainty and elevated interest rates. The EV ‘sugar rush’ The first half of 2025 should see strong new-vehicle sales as consumers look to buy ahead of potential policy changes, Michael Brisson , director of economic research at Moody’s Analytics , told Auto Finance News . “Consumer confidence is tied to politics now more than ever. People on the right side of the political spectrum feel much more confident.” — Michael Brisson, Moody's Analytics On the other hand, some consumers are concerned that tariffs and fewer EV incentives will drive up vehicle prices in the latter half of the year, he said. Both factors are likely to increase demand in the short term, especially for EVs. EV sales are positioned to surge in the first half of the year as consumers take advantage of existing tax credits, Peter Glenn , co-chief executive and head of marketing of EV fintech EV Life , told AFN . Glenn’s comments come after nearly every automaker reported YoY increases in fourth-quarter EV sales. General Motors (GM) saw the largest increase, as EV sales rose 125% YoY to 43,982 units, according to the OEM’s sales report. Pending changes to consumer tax credits and regulations could “change the marketplace completely,” Paul Jacobson , executive vice president and chief financial officer at GM, said on Dec. 4 at the UBS Global Industrials and Transportation Conference. “We have to figure out what, as a matter of policy, the administration will do,” Jacobson said. Change in the market is likely, as several market players are “selling EVs and incentives in the 30% to 40% of [average transaction price] range. We're hovering around 10% to 12%.” Ford Motor Co .’s EV sales jumped 22.3% YoY to 77,258 units in Q4, while EV sales at Lucid Motors , Rivian and Tesla rose YoY by 78.7%, 1.5% and 2.3%, respectively, according to sales reports. Lucid sold 3,099 units, Rivian sold 14,183 units and Tesla delivered 471,930 units. Automakers’ Q4 EV sales % change YoY

[caption id="attachment_58348382" align="aligncenter" width="840"] (Chart/Auto Finance News)[/caption] “A lot of these sales happened right after the election,” Glenn said, noting that the “sugar rush” of fourth-quarter EV sales could trickle into the first half of this year. A wave of consumer demand in Q1 would likely drive sales higher on a YoY basis, Moody’s Brisson added. “The new [vehicle] market is usually slower in sales in the first quarter, but it might pull forward, especially in EV demand, if people are expecting tariffs and higher prices in the second half of the year,” he said. Cox Automotive projects that new-vehicle sales will increase 2.8% YoY to 16.3 million units at yearend 2025, according to a Jan. 6 release. The increase would mark the best year for new-vehicle sales since 2019, Chief Economist Jonathan Smoke said. Cox also estimates that EV total market share will hit 10%, up from about 7.5% in 2024, making approximately one in every four vehicles sold or leased an EV in 2025. [caption id="attachment_58348387" align="alignnone" width="1523"] (Courtesy/Canva)[/caption] “While policy changes in Washington might slow the growth, those changes likely won’t take effect for some time, and many buyers might jump in before changes are made,” Cox Auto noted. Pivoting to state, local EV incentives Full-year EV sales rose 7.3% YoY to 1.3 million units in 2024, and accounted for 8.1% of total sales, according to a Jan. 13 release by Cox. By comparison, EV sales accounted for 7.8% of total sales in 2023, according to the release. In 2025, however, a lack of federal EV incentives would make state and local incentives integral to EV adoption, EV Life’s Glenn said. “When calculating tax credits and rebates, federal tax credits are a big chunk of what consumers can get, but most EVs are sold in EV-friendly states where there are over 500 different state and local rebate programs that are valuable,” Glenn said, noting EV Life would instead focus on available state and local tax credits. California Gov. Gavin Newsom , for one, is prioritizing state and local incentives in the wake of potential Trump administration cuts. Newsom’s office announced plans to create “a new version of the state’s successful Clean Vehicle Rebate Program, which was phased out in 2023,” in a Nov. 25 release. California consumers purchased 115,897 zero-emission vehicles (ZEV) in Q3 2024, accounting for 26.4% of all new-vehicle sales in the state, according to the release. Newsom’s proposal aims to “promote innovation and competition in the ZEV market.” EV market share of new-vehicle sales in California

[caption id="attachment_58348388" align="aligncenter" width="970"] (Courtesy/Veloz)[/caption] “We will intervene if the Trump administration eliminates the federal tax credit, doubling down on our commitment to clean air and green jobs in California,” Newsom said. “We’re not turning back on a clean transportation future; we’re going to make it more affordable for people to drive vehicles that don’t pollute.” Supply challenges weigh on CPO In addition to the projected bump in EV sales, total used-retail sales are also forecast to inch up YoY in 2025, while certified pre-owned (CPO) sales are expected to decrease due to ongoing supply challenges. Full-year used-car sales are predicted to hit 20.1 million units, up 1.2% YoY, according to Cox Auto data published Jan. 17. Meanwhile, CPO sales, which made up an estimated 15.6% of total used-retail sales in December 2024, are estimated to decline 1.6% YoY to 2.5 million units in 2025, according to Cox. “The 3-year-old segment is the biggest individual segment in [used and CPO] and is highly driven from off-lease. We're going to live with lower off-lease [volume] until we get to about April of 2026.” — Jeremy Robb, Cox Automotive CPO sales are the only segment Cox Auto forecasted to decline on a YoY basis in 2025. Limited inventory is a main barrier to CPO sales, Brett Keckeisen , a member of the Toyota Certified Used Vehicles team, previously told AFN . “There’s such little inventory out there for dealers to acquire,” he said, noting that what supply is available is higher priced. Auto DQs near ‘inflection point’ On the credit front, auto delinquencies could turn the corner in Q1 after leveling out toward the end of 2024, Moody’s Brisson said. Delinquencies for captives and finance institutions did not increase in Q4, while auto banks, credit unions and commercial banks saw delinquencies “creep up, but a much slower rate,” he said, without sharing specific numbers. Total delinquencies were up about 2% YoY at the close of 2024 and seemed to be “at an inflection point,” he said. While the slowdown in delinquencies could lead to loosened credit standards, auto lenders “are not going to open the floodgates with new originations unless they see significant improvement in delinquencies,” Brisson said. TransUnion ’s Michele Raneri , vice president of financial services research and consulting, pointed to stabilizing auto delinquencies in 2025 during a December conversation with AFN . “We’re in a better place with delinquencies leveling off and we’re seeing in the 2025 forecast that delinquencies will stabilize." — Michele Raneri, TransUnion [caption id="attachment_58348390" align="aligncenter" width="1008"] (Courtesy/TransUnion)[/caption] Banks’ Q4 2024 earnings so far point to improved credit performance. Capital One , Fifth Third Bank , PNC Financial and Truist all reported that the rate of past-due auto loans declined YoY during the quarter. Tariffs pose pricing concerns Trump on Jan. 20 emphasized his plan to impose 25% tariffs on products from Mexico and Canada by Feb. 1, which could affect vehicle production costs and consumer demand. “I will immediately begin the overhaul of our trade system to protect American workers and families,” Trump announced. “Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.” Tariffs could pose new headwinds for automakers such as Stellantis N.V. , which produces nearly 40% of its products in Canada and Mexico, Chief Financial Officer Doug Ostermann said on Dec. 4 at the Goldman Sachs 16th annual Industrials and Autos Week. “[Tariffs aren’t] ideal for us as it won't be for any of the automakers,” Ostermann said, adding that Stellantis will lean on available capacity in the United States to adjust “if and when those types of tariffs come into place.” “[Tariffs aren’t] ideal for us as it won't be for any of the automakers.” — Doug Ostermann, Stellantis N.V. Much like its approach to changes in the EV market, GM is taking a steady approach to navigating tariff concerns, GM’s Jacobson said at the Industrials and Transportation conference. “I understand the rhetoric that's out there and some of the unease that results … but I'm not going to overreact to a tariff if I don't know that it's not going to be traded away in 90 days for something else,” he said. “We just have to make sure we don't overreact to what's out there and model the business appropriately.” In the event Trump’s tariff policies disrupt pricing trends, consumer demand, though expected to surge in Q1, instead could take a hit in the latter half of 2025, Frank McCleary , automotive and manufacturing partner with international management consulting firm Arthur D. Little , told AFN . “An OEM can subvent and absorb [tariffs] with [strategies] to keep a $50,000 car at $50,000, but there's only so much they can carry. They can't absorb 25% tariffs.” — Frank McCleary, Arthur D. Little Navigating added tariffs In addition to pricing instability, tariffs imposed on Canada and Mexico could increase production costs for several automakers, McCleary said. A vehicle produced primarily in the United States but made with products manufactured in Canada or Mexico could face tariffs on 30% of the product, adding “several thousands of dollars onto the top line,” he said. OEMs, McCleary added, would then have to: Subvent “the daylights” out of rates; Take residual risk on lease terms; or Put money on the hood. Soaring tariffs on other countries would also bring changes to the powersports industry, Scott Yarbrough , senior analyst of motorcycles and powersports at Black Book , told AFN . “If we start a trade war and impose 25% or 60% tariffs on products coming in from other countries, we could see massive changes,” he said. “Any past year, with a democratic or republican administration, I’d say to ignore it. Right now, it's wise to be cautious and pay attention to what happens.” Shifting compliance landscape Other uncertainties hanging over 2025 include how the Trump administration might approach the Consumer Financial Protection Bureau (CFPB), which sternly enforced rulemaking in the auto market under CFPB Director Rohit Chopra during former President Joe Biden ’s administration. “We’re going to see the states, particularly the blue states, picking up the slack and the perceived reduction and/or actual reduction in federal activity,” Eric Johnson , a partner at law firm Hudson Cook , whose practice includes financial services regulation, previously told AFN . “Where they see the CFPB not acting and protecting consumers, state attorney generals will say ‘Not on my watch. We’re going to protect our consumers here in our state.’” Some acts by the CFPB during the Biden administration include: A $12.8 million fine on American Honda Finance Corp . on Jan. 17 for inaccurate credit reporting during the pandemic; A $28 million fine on TD Bank in September 2024 for sharing inaccurate information about its customers to consumer reporting companies; $20 million in fines against Fifth Third Bank in July 2024 surrounding illegal activities related to vehicle loans and fake accounts; A “fine print” warning to auto lenders in June 2024; Toyota Motor Credit ’s $60 million penalty in November 2023 for harmful practices with ancillary product bundling and poor credit reporting; and Wells Fargo Bank ’s order to pay $2 billion in consumer redress and a $1.7 billion fine in December 2022 for wrongful repossessions and fees. Under the Trump administration, however, a change in CFPB leadership is expected, and will likely soften the stern approach by the organization in the coming year, Jim Sandy , partner at New Orleans-based law firm McGlinchey Stafford , said in a Nov. 6 release. “While [Trump] did not discuss in any great detail his plans for the CFPB during his campaign, the CFPB’s current rulemaking, enforcement and supervision strategies likely will not survive past early 2025,” Sandy said. The removal of Chopra, who has directed the CFPB since October 2021 will likely happen “early in [Trump’s] second term” due to the president’s ability to fire him without cause, Sandy said. AD Little’s McCleary shared similar thoughts, noting that “an assault on the CFPB” is likely under the returning administration. “On the financial services side, if [there is] some deregulation, it's not like they're going to lower rates, they’re just going to increase costs,” McCleary said. “A lot of what the CFPB put in place [penalizes] predatory behavior, excessive late payment fees and rate increases, which makes delinquencies even higher and may impact credit worthiness down the road.” Auto Finance Summit East 2025 is set for May 12-14 at the JW Marriott Nashville featuring fireside chats with Santander Consumer USA and Chase Auto. Visit autofinance.live for more information. Click here to register for the event.