While headlines warn of tariffs and recession risks, retail automotive is proving more durable than expected. In today’s episode of CBT Now, Erin Keating, executive analyst at Cox Automotive, outlines why dealers are still seeing solid results even as uncertainty clouds the outlook for the second half of 2025.
The auto retail market shows continued strength, even in the face of new tariffs and rising uncertainty about a potential recession. In the final days of March, sales surged following the March 26 tariff announcement, driving the month’s seasonally adjusted annual rate (SAAR) to 17.8 million. April remained strong as well, finishing at 17.3 million. However, activity has started to taper slightly.
Inventory levels are slipping, and used-vehicle supply is tightening, yet pricing has held firm. Automakers have not adjusted manufacturer-suggested retail prices (MSRPs), but local dynamics are giving dealers more pricing power. Incentives and discounts have declined, pushing up transaction prices modestly without changes to sticker pricing.
Dealer sentiment remains mixed. While some reported a slowdown early in April, many ended the month with stronger-than-expected results. A recent sentiment survey conducted by Cox Automotive found that 50% of respondents plan to change their behavior in response to tariffs, but that group is split evenly between those accelerating purchases and those holding back. This division has created a net neutral effect on current demand.
Keating notes that Cox Automotive still estimates a 40% chance of recession in the second half of 2025, but the labor market remains steady and inflation is slowly cooling. These factors, combined with lingering demand and relatively healthy inventories, suggest that now is not the time for dealers to scale back. Instead, she encourages them to pursue market share and capitalize on local opportunities.
While lower SAAR numbers may be ahead, history shows profits can remain strong. Dealer profitability could hinge on how automakers absorb cost increases and how much price pressure consumers can withstand. With consumer sentiment down and spending flat, Keating advises dealers to be strategic, noting there is still pent-up demand and a competitive advantage to be gained through smart inventory management and customer education.
"This is the time to capitalize on what dealers know best. What do they have on the lots? What can their customers bear? What opportunities do they have to go and grab market share? You have an opportunity to capture the lead." – Erin Keating
