Trump’s Plans for 2025: What to Expect in Auto Sales and Lending

What’s Next in Auto: 2025 Proposals and Predictions

It’s no secret that the country expects some shifts as we transition into another Trump presidency. With policies and regulations in flux, the auto industry is bracing for impact due to a few key initiatives from the president-elect.

New tariffs

Among the most significant proposed changes is a 25% tariff on vehicles and parts from Mexico and Canada. In theory, this policy would encourage more domestic production– either by increasing demand for American-made cars or by incentivizing companies to move their manufacturing to the US. As a result, supporters are hopeful that it would bring back auto jobs for American workers.

However, with Mexico supplying 42.5% of US auto parts imports in 2024, this measure wouldn’t just impact fully assembled vehicles from foreign manufacturers. Rather, it would have ripple effects across the supply chain– majorly impacting domestic companies that import parts from Mexico and Canada.

Any impact this would have– whether good or bad– will likely be compounded by increased tariffs on Chinese goods. Trump has announced plans to impose an additional 10% tariff on Chinese goods when he takes office. On top of existing tariffs, this increase may bring the total rate to over 30%.

Expert predictions:

To start, some onlookers question whether these tariffs will even go into effect. Some speculate that Trump may be using the threat as a bargaining chip for immigration issues on the Mexican and Canadian borders.

But if the measure does go through, experts speculate that it would spell major changes for the entire auto industry.

The impact on auto:

In an interview with 7 News Detroit, auto expert John McElroy warned of immediate consequences. “Car dealerships that sell imported cars are going to see the prices of those things go up immediately. They will not waste any time at all,” he said. “They will pass those costs along. So dealers will charge more, car companies will charge more, car suppliers will charge more and then others will follow suit.”

These challenges would likely be intensified in the case that these countries chose to retaliate, which some say is a possibility. Yale University’s Budget Lab estimates that the level of consumer prices would rise by 1.4 to 5.1%, which translates to $1,900 to $7,600 per household in 2023 dollars.

As a result, rising price levels may fuel a jump in already-elevated affordability risks. As consumer wallets become stretched, demand is likely to take a hit, and businesses may see another uptick in fraud attempts. Some experts also predict a shift from sales to servicing as drivers aim to hold onto their vehicles for longer.

In the very near term, some predict that buyers will be clamoring to close on cars before January 20. But long term, industry leaders like George Glassman, president of Glassman Automotive Group, advise consumers to consider leasing.

“Leasing gives people the opportunity in most cases to have a lower payment now with the option of purchasing that vehicle that they’re leasing two or three years down the road,” he told 7 News Detroit. For dealers, this may spark an incentive to increase investment in non-sales aspects of business.

Rollbacks on EV benefits

The future of electric vehicles is a major battleground in the 2025 transition of leadership. In 2022, Biden passed the Inflation Reduction Act to boost investment in clean energy. The law included measures like consumer tax credits on electric vehicles and the National Electric Vehicle Infrastructure (NEVI) program, which is building a network of car chargers across the country.

Despite his relationship with Tesla founder Elon Musk, Trump has been outspoken in his criticism of the electric vehicle movement. “On day one, I will terminate [Biden’s] ridiculous electric vehicle mandate,” he promised supporters in one 2023 speech.

He’s voiced concerns that the push toward EVs has been driven by government spending and mandates. By cutting back on tax benefits and grants, he aims to let the private market drive innovation. But although he’s made his sentiment known, it’s still unclear what exact changes he’ll make to current policy.

Expert predictions:

According to the Department of Energy, the Inflation Reduction Act has already had a major impact on the country so far. US Energy Secretary Jennifer M. Granholm reported in a statement that more than 1.4 million electric vehicles were sold in the United States in 2023– a 50% increase in one year. During that same period, the country had close to 170,000 public EV chargers– a 75% increase since Biden took office.

Funding for the NEVI program is likely safe, according to Ben Prochazka, executive director of the Electrification Coalition, a nonprofit that works to advance EV adoption. “This is a formula fund that’s been rolled out to [state departments of transportation],” he said. “They, in many cases, have already signed and selected awardees.”

However, many feel less optimistic about the future of EV tax credits– especially because Elon Musk has confirmed that he supports the removal of the benefit. If it does get eliminated, experts speculate that EV sales are likely to plummet.

In an international example, Germany saw electric vehicle sales decline 27% in the first ten months of the year following the cancellation of a $4,900 incentive. This leads some to speculate that similar effects could occur in the US market.

The impact on auto:

As a result, experts predict that in the short term, dealers may need to take a hit to offload their inventory. Consumer Reports senior policy analyst Chris Harto pointed out the basic market reality to the New York Times. “You can’t make a vehicle $7,500 more expensive and sell more of them easily. People are only willing to pay so much,” he said.

Harto suggested that some manufacturers and dealerships may try to make up the difference by offering their own discounts. The Times article pointed to some current year-end deals, including monthly leases below $250 on specific electric models.

Changes to the CHIPS Act

The CHIPS and Science Act went into effect in August 2022 under the Biden administration with bipartisan support. It aimed to lower costs, create jobs, and strengthen supply chains by bringing semiconductor production back to the US.

One of the most notable components was $52.7 billion in grants for American semiconductor research, development, manufacturing, and workforce development. It also provided a 25 percent investment tax credit for capital expenses for manufacturing of semiconductors and related equipment.

Now, Trump is talking about getting rid of it. In a guest appearance on Joe Rogan’s podcast, the then-candidate voiced concerns that the CHIPS Act puts money in the pockets of rich companies. Instead, he supported raising tariffs to incentivize them to move manufacturing to the US on their own dime.

Expert predictions:

Whether the Trump administration will actually try to repeal the CHIPS Act is still up for debate. In November, House Speaker Mike Johnson told reporters that Republicans “probably will” try to repeal the CHIPS Act. However, he later amended his statement to say they’d try to streamline and improve it.

Chris Miller, Tufts Fletcher Schooler professor and ‘Chip War’ author, predicts that the Trump administration will continue to support the grants. “The CHIPS Act was first brought up in Congress under the Trump administration,” he said. “There’s been a whole lot of continuity between what the first Trump administration put in place and what the Biden administration’s been executing… I don’t think the new administration is going to dramatically change it.”

The impact on auto:

Regardless of what happens, experts warn that pulling back on these policies could have some negative impacts in the near term. Imposing tariffs, as previously discussed, generally raises prices for the buyer. That means that the auto industry, which relies heavily on semiconductor production, will likely see price increases across the board.

While some are hopeful that this will encourage companies to increase US manufacturing to avoid fees, others are less optimistic. Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, told CBT News that developing semiconductor manufacturing plants requires significant financial and time investment. For that reason, any initiatives are likely to take several years to impact supply– likely long after the end of Trump’s term.

During the 2020 semiconductor shortage, the lack of key microchips drove automakers to cut millions of vehicles from production. If the CHIPS Act was repealed, this may situation may arise again, resulting in major challenges for auto dealers, including:

• Limited supply and stock issues
• Longer customer wait times for car delivery and servicing
• Price increases on new and used vehicles