CarGurus' 2025 Outlook: Tariffs, EV Tax Credits, and Affordability Drive Auto Industry

As we approach 2025, the automotive industry is poised for significant shifts, driven by a range of factors that could reshape the market. CarGurus, a leading digital auto platform, has released its 2024 Recap & 2025 Outlook, highlighting key trends and influences that will shape the industry in the coming year. This article explores these factors and their potential impact on the auto industry.



Affordability and Tariffs: The Double-Edged Sword

Affordability has been the defining theme of 2024, with consumers prioritizing price consciousness in response to high interest rates and stubbornly high prices. This trend is expected to continue into 2025, influencing new and used pricing and demand. However, looming tariffs could exacerbate affordability pressures, potentially impacting vehicle pricing and availability.



As of November 2024, Hyundai, Mercedes-Benz, and Kia have the highest percentage of listed models made outside of North America, making them particularly vulnerable to tariff impacts. The timing and implementation of tariffs will be crucial, as automakers may struggle to adapt if changes are imposed suddenly. However, with adequate notice, they may be able to shift production or find alternative suppliers, mitigating the impact on pricing and demand.

EV Tax Credits and Demand

The potential end to the New Clean Vehicle Tax Credit ($7,500) and Used Clean Vehicle Credit ($4,000) could limit EV sales demand in 2025, especially as shoppers focus on affordability. In the used market, one-third of listings fall under the $25,000 qualification limit, driving strong demand and accounting for over 37% of sales year-to-date. Shoppers looking to take advantage of the credit now will find the greatest availability of qualifying used models in the Tesla Model 3, Chevy Bolt, and Nissan Leaf.



Premium Models and Interest Rates

While shoppers are still expected to prioritize affordability in 2025, the potential for even lower interest rates could expand buying power for buyers seeking lower monthly payments. This, in turn, may reignite demand for more premium options. However, this will also depend on decisions around tariffs and their impacts on automotive pricing.



Navigating the Auto Industry in 2025

As we look ahead to 2025, the auto industry faces a complex landscape shaped by affordability, tariffs, and EV tax credits. By understanding these factors and their potential impacts, investors can make informed decisions and capitalize on opportunities in the market. CarGurus' 2024 Recap & 2025 Outlook serves as a valuable resource for navigating the shifting dynamics of the auto industry and identifying trends that could drive growth and profitability in the coming year.