Automotive industry retailers in North America experience a slump in light vehicle sales following a pre-tariff increase buying spree
In the recent months, the automotive industry has been facing unprecedented changes due to the implementation of tariffs on imported vehicles and parts.
According to Patrick Manzi, Nada's chief economist, these tariffs are expected to affect all Original Equipment Manufacturers (OEMs), with varying degrees of impact. Some OEMs may bear greater costs than others, Manzi predicted in April.
The tariffs, which went into effect on April 3, have indeed caused a stir in the industry. Following Trump's announcement, there have been behind-the-scenes negotiations with several carmakers, including General Motors, Toyota, and Volkswagen.
GM, the top importer among carmakers, is expected to suffer the most from the import tariffs in 2025. The company produces more vehicles in Mexico than any other manufacturer, with Mexico accounting for 72% of vehicles imported to the USA. Approximately 450,000 vehicles are imported annually from Germany alone, making the USA a key export market for German carmakers.
In response to the tariffs, GM has announced plans to invest $4 billion in three US plants over the next two years. The Orion, Fairfax, and Spring Hill Manufacturing plants will all receive investment, aiming to increase local production and move it out of Mexico.
Toyota, the third-largest importer, is expected to be the OEM most affected by the tariffs, despite producing half of its US vehicle sales locally. The company still imports 1.2 million vehicles annually. To counteract this, Toyota plans to sell US-made vehicles through its own distribution channels in Japan to help reduce the US trade deficit.
The surge in new light-vehicle sales in the US due to the impending tariffs on vehicle imports has subsided. In March and April 2025, an additional 149,000 vehicles were purchased, but this trend has since slowed. Vehicle sales in May 2025 slowed to a 15.7m-unit seasonally adjusted annual rate (Saar), a decrease from the 17m units in the previous two months.
The production cutback, combined with strong sales in March and April, represented the first year-over-year decline in new-vehicle inventory since June 2022. At the start of May 2025, the number of new light-duty vehicles on the ground and in transit to dealer lots was 2.62m units, a decline of 4.1% year over year.
Meanwhile, Volkswagen's CEO, Oliver Blume, stated that the carmaker is in "fair and constructive" talks with the Trump administration over import tariffs and is considering further large-scale investment in US carmaking. Japan's chief tariff negotiator Ryosei Akazawa is expected in the US this week for a sixth round of talks aimed at securing concessions over a range of tariffs.
For more detailed information, the latest report from Nada is available here.
