Cox Automotive expects U.S. auto sales to drop by low single-digit percentages in late 2025 and into 2026, mainly driven by price increases, driven in turn by new tariffs on auto imports and metals – an outcome Jonathan Smoke, chief economist for Cox Automotive, describes as “not so bad,” considering the circumstances.
“Prices will rise, and volumes will decline,” Smoke says during a recent webinar during which Cox Automotive reviews auto sales in the third quarter, fine-tunes its sales forecast for full-year 2025 and hints about the U.S. auto sales forecast for 2026.
Smoke also lists some reasons for business optimism going forward, including lower interest rates, lower taxes and less regulation. “Any of those alone would be considered stimulative” to the economy and auto sales, Smoke says.
So far, dealers are expressing less worry about tariffs. According to the Cox Automotive Dealer Sentiment Index for the third quarter, tariffs are now only No.9 on the list of Top 10 “factors holding back business,” selected by 20% of the respondents, down from 33% in the second quarter of 2025.
By The Numbers
For auto sales specifically, Cox Automotive ups its U.S. light-vehicle sales forecast for all of 2025 to 16.1 million. In comparison, in June, Cox Automotive’s forecast for all of 2025 was 15.7 million.
In the interim since June, the firm has been nudging the forecast higher. That’s largely because OEMs in the U.S. market absorbed more of the tariff-related costs than expected instead of passing them through to consumers. At the same time, consumers have been buying sooner rather than later, to beat expected price hikes from tariffs, and to qualify for the federal tax break on EVs before it expires Sept. 30.
In the fourth quarter of 2025, however, Cox Automotive expects U.S. sales to slow down and remain slower in 2026. That’s assuming heftier price hikes finally arrive with the arrival of more 2026 models. There’s also a pull-ahead effect in Q4 and 2026 from all those beat-the-deadline buyers in the second and third quarters.
Next Year
Smoke tells WardsAuto he expects a Seasonally Adjusted Average Rate of about 15.5 million in the fourth quarter of 2025, down from an average SAAR of 16.3 million for 2025 year-to-date through the third quarter.
The SAAR is an estimate of what sales for the entire year would be, based on the current sales rate, and adjusted for seasonality.
For next year, Smoke says he expects sales of about 15.6 million for all of 2026. That would be down about 3% vs. the estimated result for all of 2025, and comparable to the sales pace in the fourth quarter of 2025.
Factory “Triage”
Why are manufacturers in the U.S. market less likely to just continue eating the cost of new tariffs? Partly because it’s so expensive. Cox Automotive expects all imported vehicles to experience an average cost increase to the manufacturer of $5,500, and an average increase of $1,000, even for U.S.-assembled vehicles, based on imported parts.
It’s also because other costs are going up, too, not just tariffs, says Erin Keating, Cox Automotive executive analyst. Examples include new safety features, advanced driver assistance systems and potentially a focus on building luxury and high-margin products, a tactic many brands followed during the computer-chip crisis a couple of years ago, when only the most-profitable units got priority for scarce chips.
Manufacturers will have to perform “triage” to decide where all those costs get allocated, including other urgent needs besides tariffs, she says in the webinar.
Levers to Pull
Meanwhile, manufacturers in the U.S. market still have options other than simply reducing margins to reduce the effect of tariffs on sticker prices and soften the blow to consumer demand, says Smoke, the chief economist.
For example, factories could take some options out of trim and equipment packages, rather than hike base sticker prices, he says.
“There’s definitely some upside, depending on decisions the manufacturers make,” Smoke says. “They’ve got to decide to defend, or not defend, their margins from the tariffs.”
Source: wardsauto