Tariff Impact: Prices Surge, Inventory Squeezed

While our March analysis was speculative, April’s narrative has become unmistakably real. Since the announcement of auto tariffs, we've seen swift and substantial shifts reshaping the automotive landscape almost overnight.

The tariff announcement in late March triggered a dramatic buying frenzy. Early April new vehicle sales surged nearly 50% year-over-year (YoY) as buyers scrambled to beat anticipated price hikes. This wave also rippled into the used market, with sales jumping 24% YoY as shoppers sought alternatives amid escalating new vehicle prices. Although sales rates have since normalized, a key question remains: how much future demand was pulled forward, and could upcoming months experience lower sales volumes as a result?

This surge in sales sharply depleted inventories, hitting affordable new vehicles particularly hard. Listings for new vehicles priced below $20k plunged 25.6% from March levels, and vehicles in the $20k-$30k range fell 16.2%. The pronounced squeeze in budget-friendly segments underscores consumers' urgency to secure lower-priced vehicles ahead of tariff-driven increases.

Tariffs are poised to significantly reshape pricing, potentially adding approximately $2,500 to the average new vehicle price, increasing it from around $49.9k to $52.4k. The impact varies notably across automakers: Jaguar Land Rover faces the steepest increase, with tariffs potentially adding nearly $11k to the average list price, pushing it to $107k. Volvo and BMW  also face substantial hikes, potentially rising by $6.5k and $6.3k respectively, highlighting how tariffs disproportionately impact premium and import-dependent brands.

Market Dynamics: Finding a New Balance

Despite tariff-induced volatility, both new and used markets are demonstrating remarkable resilience. Used vehicle demand, though cooled slightly from the early April spike, has stabilized at an 11.9% increase compared to last year, reaching highs not seen since 2021. Used vehicle availability is holding strong in the face of this demand, reaching a three-year high in April, and rising 5.1% YoY.

The new vehicle market presents a more nuanced story. Inventory sharply contracted in April, falling 5.1% from March levels, as consumers rapidly absorbed pre-tariff stock. Demand peaked at its highest since 2021 but has since moderated to typical seasonal patterns. Prices edged slightly upward (+0.9% month-over-month), indicating that consumers are shifting toward more affordable models as the realities of tariffs set in.

Dealer supply remains under significant strain, with new vehicle market days’ supply shrinking 12.4% YoY due to buyer urgency and continued shipping delays. Tightening availability, especially among affordable models, suggests that upward pricing pressures will persist in the short to medium term.

Tesla Listings Surge, Along With the Rest of the EV Market

Tesla continues to serve as an intriguing subplot within broader market shifts. Used Tesla listings have surged 46% since the end of January, an eye-catching headline. But context is essential. Tesla's growth in listings mirrors broader trends, with the entire used EV market expanding similarly, a clear sign of the maturing electric vehicle landscape.

Tesla’s share of used EV sales remains strong, highlighting sustained consumer preference. However, average list prices for used Teslas have dropped markedly, influenced by price reductions on new models and an influx of fleet vehicles. Nevertheless, Tesla maintains a strong market presence, with listing turnover rates comparable to other EVs.

Based on this data the EV market doesn’t appear to be shifting away from Tesla; rather, it’s broadening, offering consumers a wider selection of electric options. This expanding competition benefits buyers and helps maintain consumer-friendly pricing.