US auto sales lose steam after tariff-induced shopping spree

Business Times

8 hours ago

[MICHIGAN] US auto sales are losing momentum after a springtime surge fuelled by shoppers racing to buy cars before US President Donald Trump's auto tariffs drove up prices.
General Motors said deliveries rose 7.3 per cent in the second quarter, as industrywide demand cooled following a stronger-than-expected April and May. Ford Motor's second-quarter sales jumped 14 per cent, helped by its employee-pricing-for-everyone discount programme, though it saw the pace of growth moderate in June.
Toyota Motor's sales in April to June period rose 7.2 per cent, but volumes were essentially flat last month.
'We did have a lot of pull-forward business, I think the whole industry did' from late March into early May, said David Christ, the head of Toyota brand sales in the US. Since then, 'the sales pace returned to what I call more normal', he told reporters in a briefing on Tuesday (Jul 1).
Shoppers rushed to showrooms earlier this year as beating tariff-induced price increases became a motivation to buy, pushing up second-quarter sales an estimated 2.5 per cent from the prior-year period, according to industry researcher JD Power.
Some automakers are now seeing consumers retreat. Subaru's June deliveries dropped 16 per cent. Kia's volume fell 3.2 per cent, limiting the South Korean carmaker's total second-quarter gain to 5 per cent. Nissan Motor sales declined 6.5 per cent in the most recent three months, while Honda Motor's deliveries rose 8.4 per cent, including a gain of just 1.5 per cent in June.
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The annual automotive selling rate likely fell to 15 million in June – the slowest pace in the last 12 months – from 17.6 million in April as consumers grow cautious about big-ticket purchases over worries about the economy. With already high car prices expected to rise further as automakers manage billions of US dollars in tariff costs, it may only get worse from here.
'The party is over,' Jonathan Smoke, chief economist for researcher Cox Automotive, said.
Smoke sees the annualised monthly rate of US auto sales sticking around 15 million in the second half of the year, down from 16.3 million in the first six months of 2025. Last year, Americans purchased roughly 16 million cars and light trucks.
Randy Parker, chief executive officer of Hyundai Motor's North America business, said the company is counting on new products coming in the second half to continue its momentum amid a broader slowdown. The South Korean carmaker's second-quarter US sales rose 10 per cent, with growth slowing to a 3 per cent gain last month.
'No doubt, I think the second half is going to be challenging,' Parker said on a call with reporters. 'Flexibility and affordability is going to be the key to managing the situation in the second half.'
Sales have slowed at the Honda dealership Peter Petito manages in Queens, New York, after an uptick of buyers that he likened to a run on grocery stores before a blizzard.
It was like 'there's going to be a snowstorm and there's no milk, juice or bread', Petito said.
Car dealers polled recently by Cox reported that fears about the economy have become the No 1 factor holding back their business, replacing high interest rates that had topped the previous two surveys earlier this year and late last year.
'People are having a lot of uncertainty,' Beau Boeckmann, president of Galpin Motors, a major Ford dealer in southern California, said. 'And during times of uncertainty, people put off a major purchase.'
The high cost of cars remains an impediment. After declining for much of last year, auto prices are on the rise again. The average cost of a new car reached US$48,799 in June, up 1 per cent from a year ago and 28 per cent higher than in 2019, according to Cox.
That's pushing shoppers to stretch their budgets for a new set of wheels. Nearly one in five buyers – an all-time high – took on loans with monthly payments of US$1,000 or more in the second quarter, according to automotive researcher Edmunds.com.
Tariffs risk exacerbating that trend. Automakers have so far refrained from large, across the board price increases. Instead, they have pulled other levers, such as cutting incentive spending or raising the price of select models affected by tariffs.
'Given the impact of tariffs, prices are likely to start rising at a much faster rate,' Charlie Chesbrough, senior economist for Cox, told reporters last week.
Average monthly car payments reached a record US$747 in June, up US$22 from a year ago, according to JD Power. That has more people stretching car loans to 84 months – seven years, which accounted for 12 per cent of all auto financing last month, up three percentage points from last year.
The June slowdown was 'a hangover from some of the sales that were pulled ahead', said Mark Wakefield, global auto market lead for consultant AlixPartners. The firm predicts automakers will pass along 80 per cent of the cost of Trump's tariffs to consumers, driving up prices by nearly US$2,000 per car.
'We don't see the full pass-through until the end of the year,' he said. BLOOMBERG