The J.D. Power-GlobalData Automotive Forecast for February 2025 paints a picture of a dynamic automotive market. While retail sales are projected to rise significantly, increasing competition, affordability concerns, and EV market uncertainties present challenges for manufacturers and retailers alike.
Retail Sales Surge Amid High Consumer Spending
Retail sales are forecasted to jump 8.1% year-over-year, continuing a five-month trend of growth. Consumer spending on new vehicles is set to reach a record-breaking $42.6 billion, marking a 2.5% increase from February 2024. This surge highlights strong demand despite affordability concerns.
Industry Expert Insight:
“Consumers will spend more money buying new vehicles this month than any other February on record.”
– Thomas King, J.D. Power
Profitability Pressures Rise
Despite strong sales, rising inventory levels and increased competition are squeezing profits for manufacturers and retailers.
- Retailer profit per unit is expected to decline 11.8% year-over-year.
- The number of vehicles sold above MSRP has dropped to 11.9%, down from 19.2% in February 2024.
- Manufacturer incentives are increasing, averaging $3,227 per vehicle (up 22.8% year-over-year).
- Fleet sales are forecasted to drop 12.5%, as automakers prioritize higher-margin retail sales.
Industry Expert Insight:
“Rising inventory levels and increased competition are pressuring both manufacturer and retailer profitability.”
– Thomas King, J.D. Power
Affordability Remains a Major Hurdle
Vehicle affordability continues to impact sales recovery to pre-pandemic levels.
- Average monthly finance payments are projected to hit $738, up $17 from February 2024.
- Trade-in values are lower, with 25.5% of trade-ins carrying negative equity (a 2.0 percentage point increase year-over-year).
Industry Expert Insight:
“Vehicle affordability remains a challenge and is the primary reason why the sales pace has not returned to pre-pandemic levels.”
– Thomas King, J.D. Power
EV Market Faces Mixed Signals
The EV sector saw strong momentum in January, reaching a 9.8% retail market share, a 1.4 percentage point increase from January 2024. Key trends include:
- Growing consumer interest in EVs, with more shoppers “very likely” to consider a purchase.
- A narrowing price gap between EVs and traditional vehicles.
- Uncertainty around federal tax incentives and infrastructure funding, which could impact future adoption rates.
- J.D. Power forecasts EV market growth will stabilize at 9.1% retail share in 2025, with a long-term projection of 26% by 2030.
Industry Expert Insight:
“Federal tax incentives, infrastructure funding, and regulatory changes will impact EV growth. The extent of these effects remains to be seen.”
– Elizabeth Krear, J.D. Power
Global Market Resilience Despite Economic Uncertainty
Global light-vehicle sales in January increased 2% year-over-year, totaling 6.8 million units. February’s forecast predicts a 7% increase, driven by a rebound in China. However, the market faces challenges:
- Growth in Japan, North America, and Brazil/Argentina offset declines in China and Western Europe.
- Potential trade conflicts and economic instability add uncertainty.
- The 2025 full-year sales forecast stands at 91.6 million units, up nearly 4% from 2024.
Industry Expert Insight:
“Despite global trade risks, vehicle sales are showing resilience, with a projected 4% annual increase in 2025.”
– Jeff Schuster, GlobalData
Conclusion
The automotive market remains strong, with rising retail sales and record-breaking consumer spending. However, profitability pressures, affordability challenges, and EV market uncertainty create a complex landscape for the industry. As regulatory changes and global economic shifts unfold, stakeholders must closely monitor these key trends to navigate the road ahead.
