As the third quarter begins, automotive leaders are watching a market that’s becoming less volume-obsessed and more margin-focused. Kevin Tynan, director of research at The Presidio Group, joins Inside Automotive to break down why restrained production, lingering affordability issues, and upcoming EV incentive cuts are reshaping the retail auto market for the back half of 2025.
June’s sales pace, while softer than March and April, signals a healthier market focused on pricing discipline rather than raw volume. Tynan views the current 15 million SAAR range as sustainable for both automakers and retailers, noting that manufacturers are showing restraint by avoiding overproduction. That discipline helps maintain stronger pricing and gross margins for dealers, even as unit volumes normalize.
The industry has moved away from aggressive market-share chasing. Instead of flooding showrooms with excess inventory, most OEMs are exercising greater control over factory output, a behavior shaped by the pandemic-era lesson of scarcity-driven value. Still, the risk remains that underutilized production capacity—especially if it lingers below 80%—could eventually pressure automakers to cut costs or reintroduce lower-margin vehicles.
“To not be oversupplied, have some firm pricing and visibility going forward is not a bad thing for the industry.”
Despite speculation around reintroducing entry-level vehicles, Tynan is skeptical of the value in producing low-content $20,000 models, especially when automakers continue to lose money even on vehicles priced in the low $30,000s. He argues that courting unprofitable customers over multiple vehicle cycles is a long-term financial liability.
Looking ahead to Q3, affordability remains a critical issue. Barring a few discount-driven exceptions, domestic brands are expected to maintain elevated transaction prices. However, a short-term spike in EV sales is likely, driven by a rush to capture the $7,500 federal tax credit before it expires in September. Tynan warns dealers not to interpret that surge as sustainable demand but as a temporary response to policy shifts.
When those EV subsidies vanish, the U.S. market will get its first real test of organic EV demand. At the same time, concerns around battery longevity, uncertain diagnostics and expensive EV repairs may continue to weigh on used EV values.
Tynan also points to retail auto parts and dealership groups as overlooked winners in the automotive space. While OEMs face unpredictable margins and suppliers often struggle with volume-related pressures, dealers benefit from revenue diversity across new, used, service and F&I. Similarly, publicly traded parts retailers like AutoZone have consistently outperformed manufacturers due to consistent demand from both new and aging vehicles.
