Vehicle supply tightens amid economic uncertainty

[UNITED STATES] Ongoing trade disputes and economic uncertainty are constraining vehicle inventories and driving prices upward, according to new data from Cox Automotive.

As of early May, dealerships held just a 43-day supply of vehicles—the lowest level for this time of year since 2021, Cox Automotive reported. Although slightly improved from the 40.5-day supply recorded in April, the overall trend has been a tightening of inventory over the past year. The shortage is especially pronounced in the used-car market, particularly at lower price points, where affordability continues to be a growing concern for consumers.

With fewer pre-owned vehicles available, prices are climbing. While the latest Consumer Price Index (CPI) showed a 0.5% drop in used car and truck prices from March to April, Cox Automotive observed the opposite trend: rising prices in both wholesale and retail markets. Although the effects of former President Donald Trump's tariff policies have yet to significantly impact CPI data, automakers such as Ford have already announced upcoming price hikes in response to tariff developments.

Used vehicle values are surging. The average price of the top 50 best-selling used vehicles in the U.S. has climbed to nearly $29,000 over the past two months, The Wall Street Journal reported, citing Cox Automotive figures.

The challenges extend beyond trade policy. A global semiconductor shortage continues to hamper vehicle production. Automakers are being forced to trim output due to the limited availability of microchips—essential components in modern cars—further straining the supply pipeline. This shortfall is compounded by an uptick in consumer purchases, as buyers rush to get ahead of expected tariff-related price increases, according to dealer insights shared in a recent Cox Automotive sentiment survey.

The COVID-19 pandemic has also contributed to supply disruptions. Factory shutdowns and labor shortages worldwide have disrupted manufacturing operations, making it difficult to maintain consistent production levels and exacerbating the vehicle shortage.

“Recent sales activity has boosted market confidence among franchised dealers,” said Jonathan Smoke, chief economist at Cox Automotive, in a press release. “But as we’ve warned, 2025 is shaping up to be a turbulent year, and the road ahead could be much more unpredictable.”

In the second quarter, foot traffic at franchised dealerships reached its highest point since tracking began in late 2022. According to U.S. Census Bureau data, sales at motor vehicle and parts dealers were strong in both March and April.

Despite robust current demand, many dealers remain cautious. The combination of trade policy, global supply chain instability, and broader economic unease has created a highly volatile market environment. While recent sales have offered a short-term lift, there’s concern that the momentum may not last.

Washington’s protectionist trade stance is also fueling anxiety over the industry's future.

“The cost to source inventory is higher. Shipping expenses are up. Most third-party service providers have steadily raised their prices,” one Audi dealer noted in the Cox survey.

These issues are reverberating beyond the auto sector. Broader economic pressures tied to trade tensions and supply disruptions are pushing up operational costs and creating uncertainty across industries, potentially impacting long-term economic growth and consumer sentiment.