U.S. Vehicle Inventories Dwindle as Consumers Rush Purchases Before Tariff-Induced Price Hikes

U.S. vehicle inventories are rapidly decreasing as consumers buy new and used cars to avoid price hikes from new tariffs on imports. Cox Automotive reports new vehicle supply fell from 91 to 70 days, and used vehicle supply dropped to 39 days. This demand surge led to a 1.4% rise in March retail sales, with auto and parts dealers seeing a 5.3% increase. Automakers like Ford and Stellantis are offering incentives, while others delay shipments to avoid tariffs. The 25% tariffs, effective April 3, could reduce U.S. auto sales by 700,000 units this year.

Vehicle Supply Drops Amid Tariff Concerns

The U.S. auto market is experiencing one of its most significant inventory contractions in recent years. Cox Automotive reported that the days’ supply of new vehicles fell by 21 days in just one month—a drop far steeper than the typical five to seven-day monthly fluctuation seen in a stable market. Used vehicle supply, already constrained, declined by four days to 39 days.

“Consumers are trying to get ahead of tariffs on imports,” said Jonathan Smoke, Chief Economist at Cox Automotive, during an April 15 market update. “The decline in [new] days’ supply was one of the largest drops we've seen in several years.”

The supply crunch is being driven by a combination of increased consumer demand and disruptions in vehicle imports. Automakers such as Audi and Jaguar Land Rover have paused or delayed shipments to the U.S., with some holding vehicles at ports to avoid triggering the 25% tariff imposed on April 3. Jaguar, for instance, has ceased production of combustion vehicles and is unable to absorb the added costs of exporting its remaining inventory from the U.K.

Retail Sales Surge as Buyers Move Quickly

The rush to purchase vehicles ahead of price hikes has had a noticeable impact on broader retail activity. The U.S. Commerce Department reported a 1.4% increase in retail sales for March, exceeding economists’ expectations of 1.3%. The surge was largely driven by a 5.3% increase in sales at motor vehicle and parts dealers, rebounding from a 1.6% decline in February.

Excluding auto sales, retail sales rose by 0.5%, still above the 0.3% forecast. The data suggests that while consumers are spending more broadly, the auto sector is currently the primary driver of retail momentum.

“Net, net, these are simply blow out numbers on March retail sales where the rush is on like this is one gigantic clearance sale,” said Chris Rupkey, Chief Economist at FWDBONDS, in response to the report.

Automakers Respond with Incentives and Production Shifts

In response to the surge in demand and looming tariffs, automakers are adjusting their strategies. Ford and Stellantis have introduced “employee pricing” deals to accelerate inventory turnover. General Motors has increased production at its Indiana pickup truck plant and canceled planned downtime at a Tennessee facility to meet demand.

Nick Anderson, General Manager of a Ford dealership in Missouri, noted that the dealership is seeing strong volume but lower profit margins due to the price-conscious nature of current buyers. “The majority of people we're seeing are definitely more price-conscious. … Our volume is there but the gross is down,” he said.

Meanwhile, some automakers are holding back inventory at ports to delay tariff payments. Audi, for example, has paused U.S. shipments, opting to store vehicles at American ports rather than release them into the market.

Used Market Tightens as Buyers Seek Alternatives

With new vehicle prices expected to rise, many consumers are turning to the used market. However, supply in that segment is also under pressure. The average days’ supply of used vehicles has dropped to 39 days, and prices are climbing. Analysts warn that used vehicle prices could reach levels seen during the COVID-19 pandemic, when supply chain disruptions and production halts led to record-high prices.

“Thanks to the chip shortage and new car production slowdown in 2020 and 2021, used vehicle supply is historically low,” said CarEdge CEO Zach Shefska. “We’re already seeing more consumers shift their focus to used cars, but that market is also strained.”

Tariffs Drive Urgency and Uncertainty

The 25% tariffs on imported vehicles and parts, announced by the Trump administration on March 26 and implemented on April 3, have created a sense of urgency among consumers and uncertainty among automakers. The levies apply to all imported passenger cars and light trucks, including those from Canada and Mexico, following the expiration of USMCA exemptions.

According to S&P Global Mobility, the tariffs could lead to a reduction of 700,000 vehicle sales in the U.S. this year and a decline of 1.28 million units in North American auto production. Bank of America analysts estimate that if the full cost of the tariffs is passed on to consumers, U.S. auto sales could fall by as much as 3.2 million vehicles in 2025.

Former Ford CEO Mark Fields summarized the situation succinctly: “The cost of vehicles will go up. It’s just math. The bottom line is there is absolutely no vehicle that won’t be impacted by tariffs.”

Market Outlook

While current sales figures are strong, industry analysts caution that the momentum may not last. Once tariff-free inventories are depleted, higher prices could dampen demand. Telemetry, an auto advisory firm, projects that increased production and parts costs could result in up to 2 million fewer vehicles sold annually in the U.S. and Canada.

Despite the uncertainty, some automakers are optimistic. Stellantis Chairman John Elkann said he was “encouraged” by President Trump’s recent comments suggesting potential relief for automakers, though no specific policy changes have been announced.

For now, the U.S. auto market remains in a state of flux, with consumers racing to buy before prices rise further and automakers scrambling to adapt to a rapidly changing trade environment.

References

• U.S. vehicle supply is falling amid tariff fear-buying
• U.S. Retail Sales Surge Slightly More Than Expected In March
• Cox Automotive Auto Market Report: April 15 - Cox Automotive Inc.
• Tariffs will slam car sales and production, analysts say
• The American Dream Could Soon Be Dead For These Car Manufacturers
• Tariffs in the second Trump administration - Wikipedia