Tariffs Tariffs Tariffs

Tariffs indeed are the topic du jour and will likely be the topic du quatre prochaines années, if history holds. (And my apologies for our French speakers. I did poorly in high school French. That's a Google-powered guess.)

We don’t have a crystal ball, of course, and expectations are that deals will be worked out. Our team posted initial thoughts last week (Tariffs Across North America WIll Upend the Auto Industry) and will be updating our POV as the story evolves.

One thing we do believe: The tariff talk and speculation of rising prices are likely motivating buyers to buy now. That's just the reality of the market. (In Detroit, a local Chevrolet dealer is pushing this narrative in television advertising.)

Yesterday, our team reported new-vehicle prices in January were higher year over year by 1.3%, the fifth straight month of year-over-year gains. The full Kelley Blue Book report is here, and does show how Stellantis is bucking the industry trend by pulling transaction prices DOWN year over year, the most of any automaker in January. Later this week, we will be reporting new- and used-vehicle inventory as measured by our vAuto Live Market View database. As the numbers illustrate, Stellantis' inventory woes are fading.

Also worth noting: The first signs of spring! The January Manheim Used Vehicle Value Index was published on Friday and showed an uptick in prices and activity. Our team is expecting a relatively normal “spring bounce” in the used-vehicle market, as tax return season gets underway. A warming of wholesale activity is an early sign that dealers are expecting a healthy spring bounce as well, as retailers grab inventory to restock the shelves.

The Musk Factor?
Our team has been fielding more queries about Tesla sales performance, framed in the context of Elon Musk’s current role as favored presidential wingman. It’s a fair question: Does CEO behavior impact vehicle sales? Like so many automotive stories, the answer is complicated.

Our initial estimates of January new-vehicle sales suggest Tesla volume was down 15.9% from December, a sizeable drop. But looking at sales performance over the past decade, that’s par for the course. Tesla tends to stuff sales into December, January be damned.

Over the past 10 years, Tesla sales volume in January beat December only one time, and the year over year decline last month was smaller than the decline in January 2024. In fact, last month was the second-best January ever for Tesla in terms of volume. But what about Q4 2024? Profits were down, but it was Tesla’s best Q4 ever for volume.
 
OK, sure. But Tesla owners are fed up and selling their vehicles, right? Fair question. And the volume of used Tesla models listed on Cox Automotive’s Autotrader in Q4 was at its highest point ever, averaging around 11,300 through the quarter and up from a year earlier when an average of 8,800 used Teslas were listed. That’s a big gain.

At the same time, the used-car market is driven by the new-car market, and Tesla new-vehicle sales went into hyperdrive (as Tesla may say) in 2021. From an average of about 17,100 units in 2020, Tesla’s monthly sales jumped to 29,500 in 2021; the monthly average volume was 43,500 in 2022. In other words, the 28% increase in used Tesla models listed on Autotrader last quarter was likely more reflective of the fact Tesla new-vehicle sales volume went from 205,000 in 2020… to 350,000 in 2021… to 520,000 in 2022… to 670,000 in 2023. More new means more used.

The Elon Musk show is certainly front and center in America right now. But is it impacting Tesla sales? Tesla volume in 2024 was down year over year, but new EV competition is mostly to blame, and the year finished strong. Profits in Q4 were lower, but volume was high. And a look at current new and used sales reveals mostly normal patterns. This story is still being written.