Q3 2025 Auto Market Maintains Stability as Policy Shifts Shape Pricing and Production

• Market stability: The U.S. auto market remained steady in Q3 2025, with average new-vehicle prices holding around $49,000 and inventory levels down 5% year over year amid faster-than-normal model-year transitions.
• Segment pricing divergence: Mass-market prices were in line with 2024 at just over $45,000, while luxury prices increased 3% to $72,000, lifting the overall average even though luxury brands represent just 15% of the market.
• Production shifts domestic: 56% of dealer inventory was U.S.-built in early October (up 8.9% since July) as imports from the EU fell 12.2% and U.K. imports dropped 12.4% following a Jaguar Land Rover production shutdown.
• Used and wholesale alignment: Used-car prices rose 2.8% year over year as supply tightened, while wholesale prices declined 3.4% quarter over quarter, led by sharper depreciation in EVs (down 10.4% QoQ).
• Policy and pricing outlook: Automakers accelerated the rollout of 2026 model-year vehicles and face a new 25% tariff increase on medium- and heavy-duty trucks and vans, while parts tariff relief for U.S. assembly was extended through 2030.

The U.S. auto market made cautious gains in the third quarter of 2025 as automakers and consumers adjusted to evolving policy changes, including the expiration of federal electric vehicle tax credits and the introduction of new tariffs. Vehicle prices were largely unchanged on average, inventory levels reflected an accelerated transition to the new model year, and production continued to shift toward more U.S. assembly. While affordability pressures persisted, the market overall showed balance heading into the final quarter of the year.

New-Vehicle Prices Hold Steady, With Luxury Brands Lifting the Average

New-vehicle sales rose 5% in Q3, supported by consumer demand, seasonal incentives and automakers’ willingness to absorb most tariff costs for a transitional period. Prices remained consistent, averaging roughly $49,000, up just 0.5% year over year, extending two years of relative stability.

Within the market, trends diverged by segment. Mass-market new-car prices were essentially unchanged, down 0.2% year over year and averaging just over $45,000, but with 5% less inventory this year. In contrast, luxury prices increased 3% to slightly above $72,000, pulling the overall average higher even though luxury vehicles represent only about 15% of total inventory.

Lower inventory among mass-market brands was driven by domestic automakers that have aggressively sold down stock of outgoing 2025 model year inventory and are leading the push to get 2026 models on dealer lots early this year. There were fewer new cars in showrooms for Jeep, Chevrolet, Ford and Dodge as those brands have been focused on clearing out aged inventory and adjusting production levels, particularly for imported or electrified models.

In the luxury segment, Land Rover, BMW and Lexus led price increases. Land Rover’s average prices climbed 17% year over year, reflecting tariff exposure since all of its models are imported from the U.K. or Slovakia. BMW and Lexus also saw higher prices while maintaining lean inventory levels, a combination that supported pricing strength.

Many automakers have announced or already implemented plans to implement larger price increases on higher-priced vehicles — where buyers can more readily absorb costs — and smaller adjustments on entry-level models to preserve affordability.

Production Continues Shifting Toward U.S. Assembly

By early October, 56% of dealer inventory was built in the U.S., an 8.9% increase from July. Imports from the European Union declined 12.2% quarter over quarter, and U.K. imports dropped 12.4% following a cyberattack that temporarily shut down Jaguar Land Rover production in September and early October. Imports from Japan fell by 4.4%, while South Korean imports were down 1.4%.

Domestic automakers increased reliance on U.S. plants to offset tariff exposure and maintain supply stability. Dodge posted the largest quarter-over-quarter increase in U.S.-built inventory — up 24 points to 76.9% — after indefinitely pausing production of the Hornet from Italy and potentially discontinuing the electric Charger from Canada. The brand’s lineup is now centered on the U.S.-built Durango SUV.

Affordability: Entry-Level Supply Shrinks, Mid-Range Models Steady

Vehicles priced under $30,000 continued to contract, accounting for 13.3% of inventory, down 11% year over year. These vehicles remain the most exposed to tariffs, as most are built outside the U.S. Only two sub-$30K models — the Toyota Corolla and Honda Civic — are assembled domestically.

By contrast, vehicles priced $30,000–$49,000 represented 47.7% of inventory, holding steady as automakers managed production discipline. This price band remains the core of the market, encompassing compact and mid-size sedans, crossovers and entry-luxury models.

Inventory in the $50,000–$69,000 range declined 10% year over year as automakers scaled back mid-range offerings to focus on affordability, while vehicles priced above $70,000 increased modestly, driven by luxury SUVs and premium EVs.

Trim-Mix Change Reflects Market Rebalancing

Automakers continued to balance profitability and affordability through production adjustments to the mix of trims.

• Entry-level trims rose slightly to 34.3% of new-vehicle inventory as manufacturers leaned on these variants to offer lower-priced options for value-focused shoppers at any price point.
  
• Mid-level trims declined to 40%, though they posted the fastest price growth of any category, up 3.5% year over year.
  
• High-level trims edged higher to 25.7% of inventory, approaching the peak share seen during the 2021-22 supply shortages.

With federal emissions and fuel-economy incentives reduced, some automakers are extending the life cycles of existing internal-combustion models and offering decontented versions on proven platforms to maintain affordability and manage capital investments.

Used and Wholesale Markets Show Gradual Tightening

The used-vehicle market remained constrained in Q3, with inventory down 0.6% year over year. Prices increased 2.8%, marking a second consecutive quarter of growth after an extended period of declines. Vehicles spent an average of 50 days on lots, down from 55 earlier in the year, as buyers continued to move toward available inventory.

At the wholesale level, used-car values declined 3.4% quarter over quarter, reflecting moderate normalization after earlier gains. EV values decreased more sharply — down 10.4% quarter over quarter and 17% year over year — while gasoline vehicles saw a smaller correction, down 2.9% and 7.9%, respectively. Tesla values fell 1.9% quarter over quarter, while non-Tesla EVs declined 11.7%, underscoring variation across brands.

Tariffs and Model-Year Transition Shape Outlook

Automakers accelerated the rollout of 2026 model-year vehicles, which now represent one-third of dealer inventory, the highest share in recent years for September. The faster transition helps manufacturers offset tariff costs through new pricing structures and destination fees.

In addition, a new 25% tariff on imported medium- and heavy-duty trucks and vans takes effect Nov. 1 and will apply to some full-size pickups and vans, while tariff relief measures on imported parts used in U.S.-assembled vehicles have been extended through 2030.