The U.S. auto industry entered the second half of 2025 on stronger footing than many expected. In today’s episode of Inside Automotive, Tyson Jominy, vice president of Data & Analytics at J.D. Power, joins us to discuss July’s sales performance, the pull-ahead effect on EV demand, and how tariffs and affordability are shaping the market outlook.
July new-vehicle sales rose 4% year-over-year, a solid result given that last July had unusually high volumes due to system disruptions in June and a rush of tariff-driven early purchases. Beating those tough comparisons, Jominy says, signals that consumer demand is still holding steady.
One of the biggest drivers in July was electric vehicles. With the federal EV tax credits now phasing out, shoppers rushed into dealerships to buy ahead of expected price hikes and tighter supply. Jominy notes that this pull-ahead is not just eating into fourth-quarter demand but could even be drawing from 2026 sales.
Automakers have already slowed EV imports, dealers have reduced orders, and supply is thinning in key markets. For example, California typically sells about 30,000 EVs each month, but this July began with only about 44,000 units available. That shortage could leave some buyers empty-handed by year’s end.
Looking forward, tariffs are expected to raise prices further. Jominy projects prices will climb about 4% by the fourth quarter as 2026 models arrive, with a modest 5% hit to volume. Already, the average new-vehicle transaction price exceeds $45,000, up roughly $900 from a year ago. Used vehicles average nearly $30,000, underscoring the persistent affordability challenge for consumers.
Younger buyers remain a long-term concern. Jominy points out that Gen Z lags millennials at the same stage of entry into the new-car market, leaving fewer young shoppers in showrooms. Leasing, often a tool for affordability, is also struggling. Lease penetration has dropped back to around 20%, well below pre-COVID levels of 31 to 33%. Much of that decline ties to falling EV leases, which once represented 80% of all electric sales. Stricter financing requirements and the resumption of student loan payments are additional hurdles for younger consumers who might otherwise lease.
"The dollars spent on a car will be more now than ever. That tends to lead to higher total dollars available for dealer profitability."
Despite these challenges, J.D. Power is holding its full-year sales forecast at 16 million units, matching its outlook from the start of the year. While the first half outperformed expectations, the second half will likely run slower as tariffs, pricing pressures, and constrained EV supply take effect. Even so, total consumer spending on vehicles continues to reach record levels, keeping profitability opportunities strong for dealers. On the used side, franchise retailers are currently selling slightly more used vehicles than new ones, but supply constraints will remain tight until more lease returns replenish the market later in the decade.
Jominy emphasizes that while 2025 presents complex headwinds, including affordability and tariffs, the market is still resilient. Consumers are spending more dollars on vehicles now than ever before, creating opportunities even in a slower growth environment.
