Affordability will be one of the largest challenges in 2025 for Detroit’s automakers after General Motors Co. and Ford Motor Co. posted their best sales year in the United States since 2019, and as Stellantis NV’s declines eased somewhat in the final months of the year.
Inventories swelled in 2024 following the end of pandemic-induced vehicle and microchip shortages, as well as the United Auto Workers strikes in the fall of 2023. Although automakers have emphasized cost reductions and increased incentive spending, they’ve also sought to prioritize profit margins to fund investments in electrification and other future technology.
Combined with minimally receding interest rates, inflation and other economic concerns, affordability will remain an obstacle for many vehicle shoppers — but delayed purchases during the pandemic also mean many consumers are now in need of a car.
“We do have millions of consumers who have deferred their purchases,” said Ivan Drury, insights director at auto information website Edmunds.com Inc. “Those consumers are starting to come back now that you can go to a dealership and test drive a car. It’s not a favorable time to buy, but it’s the time to buy.”
GM’s 2.7 million vehicles sold in 2024 was a 4.3% uptick from 2023 — still under 2019’s nearly 2.9 million, but marking continued steady sales growth since a recent low point of about 2.2 million in 2021. Meanwhile, Ford’s nearly 2.1 million sales were up 4.2% from 2023, still below 2019’s 2.4 million.
The crosstown rivals were fueled by growth in cash-cow pickups and record years for electric vehicles. GM’s nine all-electric models surpassed Ford’s three: 114,432 sales to 97,865, up 50% and 35% year-over-year, respectively.
Meanwhile, Stellantis, which had a rotten 2024 that featured the immediate departure in December of CEO Carlos Tavares, posted a 15% decrease year-over-year in U.S. sales of vehicles from its Chrysler, Dodge, Jeep, Ram and other brands. But declines curtailed in the final three months of the year to a decrease of 7% from double-digit drops in the preceding quarters as the automaker emphasized global inventory reductions, boosted incentives and reduced prices.
Elsewhere, Tesla Inc. posted its first annual sales drop in more than a dozen years, down 1.1% in global deliveries, though its fourth-quarter sales increased thanks to cheap financing, free charging and other perks.
Among other mainstream automakers, Toyota Motor Corp.’s U.S. sales increased 3.7%, Honda Motor Co. Ltd. sales were up 8.8%, Subaru Corp.’s rose 5.6%, and Nissan Motor Co. Ltd. was up 2.8%.
Kia Corp.’s U.S. sales rose 1.8%, while Hyundai Motor Co. was up 4%. Volkswagen AG’s U.S. sales numbers rose 15%.
California-based EV maker Rivian Automotive Inc. on Friday said it met its annual production target after lowering it in October.
The pressures of 2024, however, aren’t exactly letting up in 2025. The U.S. Federal Reserve is forecasting fewer rate cuts this year. A new presidential administration portends policy changes, including the potential for more tariffs, which could increase costs for automakers and potentially be passed onto consumers. As for EVs, President-elect Donald Trump has suggested the up to $7,500 tax credit for plug-in vehicles reformed by the Biden administration’s Inflation Reduction Act could be revoked after he takes office.
Still, analysts expect a strong 2025 for new car sales, with automotive digital services provider Cox Automotive Inc. recently projecting this year will see 16.3 million sales in the U.S., which would be the best year since 2019 and up from 2024’s expected total of approximately 15.9 million.
Average new-car transaction prices stood at more than $47,000 in 2024, according to Edmunds, which is about $10,000 higher than average prices were five years ago. But buyers on average did get at least a little price relief last year compared to 2023.
The consumer desire for more affordable options puts companies like Stellantis in a tough spot, Drury said, since it doesn’t have cheaper models ready to launch right around the corner. The luxury-focused Jeep Wagoneer S and performance-oriented Dodge Charger Daytona muscle car — the company’s first retail EVs from its U.S. brands — are expected to hit dealer lots before the end of the month just as Trump takes office.
“Customers who bought a vehicle six to seven years ago, when they come back, they’re not going to be looking at a lineup that looks familiar,” said Drury, noting that the company’s defection rate is higher than other brands. “They chased the upmarket customers and went all in on the Grand Wagoneer. In going upmarket, they left behind those that helped start the entire market for them.”
But dealers like Mark Trudell, general manager at Extreme Dodge Chrysler Jeep Ram in Jackson, are expecting a good 2025 based on the steps the company took around incentives in the final months of 2024 and the communication from upper management like a commitment to not leaving retailers hanging if the plug-in vehicle tax credits go away.
“There’s a lot of positivity coming out of the business centers,” Trudell said. “People are all about pricing right now. Rates have dropped a little bit, which helps, but affordability is the biggest thing right now.”
Meanwhile, GM is hitting a bit of a sweet spot with offerings like the Chevy Trax and Equinox and Buick Envista, Drury said: “Brands with affordable vehicles are not giving up a lot. They’re absorbing a lot of first-time customers.”
Even though the Ford Maverick compact truck has crept up in price since it was unveiled, the small pickup that represents Ford’s entry-level has generated a popular following. But recalls and warranty issues have plagued the Dearborn automaker. It has been seeking to address those problems with each new vehicle launch, but that can leave older models in limbo.
Almost three-quarters — 73% — of Ford’s inventory is still model-year 2024, according to Edmunds. That’s compared to 34% of the industry overall. GM’s is 23%.
“They were putting heavy incentives on ’23s deep into ’24,” Drury said. “Now they’re far behind the competition. I guarantee in March and April, there will be ’24 model-year Ford products on dealer lots. It’s like: Are we ever going to stop the bleeding?”
Garret Nelson, analyst at financial insights firm CFRA Research, on Friday cut a yearlong target on Ford shares by $1 to $10.
“While Ford’s Q4 sales were stronger than expected, we think it faces its fair share of headwinds entering 2025, namely bloated inventory levels, tepid consumer demand due to stubbornly high new vehicle prices and interest rates, and the likely elimination of the federal EV tax credit,” Nelson wrote in a note. “In our opinion, the execution of (Ford) management has also been underwhelming.”
In a separate note to investors, Nelson emphasized that for GM, elevated inventory levels, potential elimination of the federal EV tax credit, weaker sales in China, and its lack of exposure to the fast-growing hybrid market are challenges for the Detroit automaker in 2025. GM plans to reintroduce plug-in hybrids to North America in 2027.
Last year was a recalibration for the vehicle-selling business, said Inder Dosanjh, CEO of the California Automotive Retailing Group, which has 18 showrooms in California’s San Francisco Bay Area, including nine GM stores and a Ford store, after selling a Stellantis location last year because its vehicles became too expensive. Increases in inventories, along with high transaction prices and interest rates, increased costs and made the market more competitive again.
“Salespeople forgot how to sell cars,” said Dosanjh, noting the company had to reinstitute regular sales meetings and training.
He’s optimistic for 2025 now that interest rates have come down slightly, automakers have increased their incentive spending, and they’re emphasizing reducing costs to make vehicles, particularly EVs, more affordable. Up to 60% of sales at one Dosanjh’s stores are EVs, making today’s market much different than even a few years ago.
“It’s a new era of business,” he said. “It’s not pre-COVID business. It’s a completely new era. We’re all learning.”
With EVs having tighter margins than some of the gas- or diesel-powered vehicles, that means cutting costs: keeping inventories around 90 days, reducing marketing spending and limiting hiring in favor of using available digital technologies.
With so much of his business EVs, though, Dosanjh said he’s not too worried about the potential for the Trump administration to end the plug-in vehicle tax credit. EVs can be a tough sell, but many buyers come in knowing more about them than even his own team. A Chevrolet Equinox EV that starts at $33,600, incentives on the Ford Mustang Mach-E, and a fuller lineup of EVs in general are helping, too.
“It’s a much smarter buyer,” Dosanjh said about EV shoppers, adding in particular about Cadillac: “The overall EV lineup, it’s a game-changer for us. We can compete in the same markets at Tesla. We can compete with whoever we need to compete, which wasn’t always that way in the past.”