Discussing demand in the US auto industry requires a baseline understanding of what’s historically been considered normal. You need only go back 25 years to paint a helpful picture.
The year 2000 was the peak of the mountain, when 17.4 million light-vehicle units were sold. A light vehicle is simply a car or light truck that weighs less than 8,500 pounds. Fast-forward just nine years to 2009 and you can see the most recent bottom, 10.43 million units. The sales rate of the Great Recession was the worst per capita the US had ever seen. Far worse than the late 1950s, which was the last time we saw a similar rate.
Between 2010 and 2017, sales increased by low double digits for a few years and then slowed until they eventually hit a record high of 17.55 million units. Between 2017 and 2019, the industry saw alternating modest growth and decline before swiftly falling to 14.5 million units in 2021 due to the covid-19 pandemic. Since then, the well-documented chip shortage greatly affected growth, but we at Morningstar believe that crisis is now in the rearview. Now new uncertainties have arrived for consumers and automakers alike in the form of high interest rates and tariffs.
Our five-year sales forecast does not call for US light-vehicle sales to return to 17 million units a year until 2028, as reported in the recently published Motors and Markets 2025: United States. The detailed 58-page report assesses the state of the industry and actionable ideas for financial advisors.
Understanding light-vehicle demand is a helpful tool in evaluating and analyzing the stock price of car manufacturers like General Motors GM and global auto suppliers like Gentex GNTX, who make innovative rearview mirrors, camera monitoring systems, and more. The more consumers they can appeal to, the more money they can make. At times when affordability is hampered by inflation and high interest rates, the strategies these companies adopt have significant effects on their perceived long-term value.
US Five-Year Sales Forecast
Source: Morningstar. Change is calculated from the midpoint of each year’s range. Data as of March 4, 2025.
We forecast 2025 US light-vehicle sales will be between 16.2 million and 16.4 million units, assuming there are no major disruption from tariffs. There’s more uncertainty for 2025 than in a typical year due to the ambiguity of what the economy will be like under the President Donald Trump administration. It’s difficult to see how price increases from tariffs help auto volumes, especially when prices affected by high interest rates and inflation are already keeping some consumers out of the vehicle market.
The upside to dreadful events like the pandemic and chip shortage is that growth can be expected through 2029 even if there’s a mild recession between now and then. US auto sales have been at severe recessionary levels at times across 2020 and 2021 due to the chip shortage, and recent levels indicate a mild recession when looking at per capita data. Normally incentives as a percentage of average transaction price are high just before a recession, as are sales, but that is not the case in early 2025.
With credit remaining readily available and high used-vehicle prices yielding strong trade-in values, there’s reason to be optimistic about US auto demand in the next few years, even if the US has a recession. If it does, sales could crater for a few months while consumers absorb the shock and weather the storm.
Used-vehicle prices are declining but still high. That could be a positive for new-vehicle demand in 2025, because consumers may be better off just buying the new vehicle they want rather than overpaying for a used one.
Data from Experian revealed the gap between the manufacturer’s suggested retail price on new vehicles and what Experian calls its “adjusted clean retail” used value was $17,059 in the fourth quarter of 2024, up 4.2% year over year. A year ago, the gap was still slightly narrower than the prior peak gap of $15,465 in the second quarter of 2020. As this gap narrows, used vehicles make less and less sense for consumers, suggesting upside to new-vehicle sales coming once the inventory is finally available.
The amount financed for a used vehicle was $26,468 in the fourth quarter of 2024, a year-over-year decline of 1.3% and a 5.2% decline from the fourth quarter of 2022, which is a good sign for used-vehicle affordability continuing to improve off high levels induced by the chip shortage.
There’s plenty of room for leasing to provide new-vehicle sales growth this decade, too. Automakers’ finance arms over the past few years haven’t had a ton of reason to write leases with light inventory. Current penetration is around the mid-20% but, we believe in a few years’ time it could go as high as the low-30% range last seen in 2019.
Light trucks—a category that includes crossovers, pickups, SUVs, and vans—has taken share from cars every year since 2013 thanks to continued crossover penetration, a segment alone that now represents about half of annual new US light-vehicle sales. Americans love their large vehicles, and recent gas prices, other than a surge in mid-2022, have not been reason enough not to stop buying them. The shift away from cars in the US has been very noticeable. Since 2016, the light-truck mix in industry-new-vehicle sales has greatly increased while the demand for cars dropped. In 2024, light trucks made up 81.4% of the mix.
Morningstar’s equity data and research covers all industries, seeking sources of economic moats. Researchers then use those insights to forecast future cash flows, allowing for fluctuations in market pricing and sentiment, to provide investment opportunities. The datasets cover information like:
If this article piqued your interest, download the recently published Motors and Markets Report. It includes commentary and analysis of the US automaker, GM, who just recently executed a large stock buyback, and the auto supplier, Gentex, which was not covered here. Gentex might be interesting to investors and advisors alike due to its narrow moat and dominant share of the dimming auto global market. The report also goes into greater depth about the chip shortage, affordability, interest rates, tariffs, and more.
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