With tariffs, the impending expiration of EV tax credits, and shifting OEM production strategies, the retail automotive industry is anything but static. In today’s episode of Inside Automotive, Joe McCabe, president and CEO of AutoForecast Solutions, joins us to share where he sees the market headed.
Tariffs remain a major concern for both automakers and suppliers. For imported brands, manufacturers must decide whether to absorb tariff costs or pass them on to consumers. Lower-priced vehicles are particularly vulnerable, as higher costs could make them uncompetitive in the market. Suppliers are also deeply affected, since hundreds rely on globally integrated supply chains to provide the parts and materials needed to build vehicles. Without suppliers, the industry cannot function. McCabe adds that tariffs can also disrupt vehicle mix, forcing automakers to prioritize higher-margin products to offset costs, which risks pricing entry-level buyers out of the market.
Even with these pressures, automakers cannot overhaul production overnight. New facilities or tooling cannot be launched in a matter of days, and most automakers are already developing products that will not launch for another three years. By then, the political climate may be very different. In the meantime, manufacturers are evaluating secondary and tertiary supply chains in low- or no-tariff countries while also exploring opportunities to reshore production. Although Canada and Mexico play a vital role in North American automotive operations, McCabe believes future investment will be concentrated in the United States. Vehicles that comply with USMCA trade rules will only face tariffs on noncompliant portions, but the clearest way to avoid volatility is to build directly in America. He emphasizes that U.S.-based production not only minimizes tariff exposure but also provides stability for long-term product planning.
The upcoming expiration of federal EV tax credits on Sept. 30 is also unlikely to drive significant consumer demand. McCabe points out that early adopters are already in the market, and tax credits did little to accelerate wider adoption. Once credits end, automakers will need to absorb more of the financial burden rather than raising prices, and many will recalibrate strategies to build multiple powertrains—ICE, hybrids, and EVs—on the same production lines instead of committing solely to BEVs. He notes that manufacturers who can flex production lines will have the greatest advantage, as consumer preferences remain fluid.
"If you want to plant your flag, and you're not in North America right now, it'd be a fool's errand to drop into Canada and Mexico. You're going to plant your flag in the United States."
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Looking ahead, McCabe says manufacturers and suppliers should closely watch the USMCA agreement, which may be renegotiated in 2026. He anticipates a stronger emphasis on U.S.-built vehicles under the Trump administration, which could disadvantage Canada and Mexico. Many global automakers, including Hyundai and Toyota, have already invested heavily in U.S. facilities to reduce risk. McCabe believes this shift signals a long-term move toward regional self-sufficiency in production, particularly as political and economic pressures continue to reshape trade policy.
Dealers also stand to benefit from these changes. In recent years, OEMs withheld high-volume vehicles to push EV allocations, leaving dealers with inventory that consumers did not always want. Easing regulatory requirements could rebalance supply and give dealers products that move more quickly. McCabe underscores that dealers are in a strong position to gain back leverage with OEMs as manufacturers broaden product offerings and prioritize vehicles that fit customer demand.
Meanwhile, the used-vehicle market is positioned for significant growth. Nearly 60 percent of BEVs today are leased, meaning a wave of high-quality used EVs will return to market in the next few years. At the same time, manufacturers are finding new revenue through over-the-air updates and subscription services, allowing them to continue earning from vehicles well beyond the initial sale. This creates opportunities for dealers as well, since used vehicles with software-enabled features could drive new revenue streams even after the vehicle changes hands.
Affordability remains one of the industry’s biggest challenges. With the average new vehicle priced around $49,000 and monthly payments above $750, many consumers are stretched thin. Automakers have little room to raise prices further without losing buyers. Inventory levels also remain high, putting additional pressure on manufacturers and dealers to move vehicles before the next generation of models arrives. McCabe stresses that affordability will ultimately dictate the pace of adoption for both new vehicles and alternative powertrains, making it the most critical factor to watch.
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