A chip shortage means there aren't enough tiny computer parts needed to make cars work properly. This can slow down how many cars manufacturers can make.
Incentives are special deals or discounts that car companies offer to get people to buy or lease their cars. It can make the car cheaper or easier to afford.
Leasing an EV means you pay to use the electric car for a set time, like a few years, instead of buying it. It's like renting a car but for a longer time.
Parts prices are the costs of the different pieces that make up a car, and they can change based on things like taxes and how easy it is to get those parts.
Dealer sentiment is how car dealerships feel about selling cars and the market, which can change based on different events like economic conditions.
Term
$7,500 tax credit
The $7,500 tax credit is a discount offered by the government to people who buy electric cars. It helps lower the price of the car and encourages more people to choose electric vehicles.
The CARS rule was a government program that helped people get money for trading in their old cars for new, more efficient ones. It was meant to help the environment and boost car sales.
Transparency in car sales means being clear about how much a car really costs, including all the extra fees. This helps buyers understand what they are paying for.
LIVE
Welcome to Daily Drive for Wednesday, December 31st, 2025. I'm Kellan Walker in Las Vegas.
Today on the show we continue our annual series of conversations about the biggest stories
of the past year, pivoting now to the automotive retail landscape in 2025. I'm joined by members
of the Automotive News retail team. Melissa Burden and Dan Shine are senior retail editors
for automotive news. John Hutter covers retail F&I. Paige Hodder covers dealership mergers
and acquisitions and Group One Automotive. Mark Homer covers retail tech. Here's the
first part of our conversation. Melissa and Dan, as senior retail editors, give us the
bird's-eye view. What defined 2025 in auto retail and what were the dominant themes?
Go take it away, Melissa.
Okay. I think it was really a mix. I'd say that for a couple of reasons because we started
the year, there was a lot of optimism with the new president and I think there were dealers
really particularly thought that I think a lot of the regulations and some of the laws would
change for the better for them. But then as the year kind of went on, we had tariffs which kind of
really I think changed the tone somewhat of their optimism as well as we had other factors like
consumer affordability and car prices or vehicle prices reaching on average over $50,000.
So there was kind of a mix of things I think that happened this year that led a little bit.
We even had like a chip shortage for some of the brands where they didn't have as many
microchips to make some other vehicles and so some brands saw shortages on certain trims and
I think dealers were still profitable for the most part. Some did better than others but that's
kind of what I would say. I would say tariffs, affordability challenges, AI was another big theme
and affordability was I think a big thing because not as many people were buying vehicles which
impacted FNI offices and their profitability. Tariffs kind of impacted parts sales and parts
pricing which pushed a lot of people, a lot of consumers to independent garages where they
thought they could get a cheaper car repair or they just put off car repairs and AI was
kind of around there and tantalizing dealerships and how can we use this and harness this to maybe
improve our customer service, improve our processes. So those are kind of the three
themes that I kind of take away. And Dan, would you say overall the dealers have a good year or a
bad year? Well, they're not by the side of the road picking up cans for the turn into the
grocery stores. I think they did okay. They would probably say not as good as they would like or
not as good as they've had in the past years but I still say most the well-run ones were profitable
and did just fine. Now, Melissa, Tariffs dominated headlines, tax credits disappeared and dealers had
to navigate constant uncertainty. How did they fare? I think most dealers kind of roll with the
punches. They're usually really good at pivoting when they need to. So I think that we saw a lot
of that this year. Tariffs, I think a lot of the automakers actually ended up taking on some of
the price increase that wasn't necessarily passed on to customers. So I think that was for some
helpful. But yeah, I think they generally just kind of roll with it and pretty adaptive.
And John, did tariffs and tax credit changes actually affect how dealers structure deals?
Well, if anything, you had those two bursts of consumers buying vehicles to get ahead of them.
One was in the spring where Trump started announcing tariffs and so consumers rushed to buy vehicles
before the tariffs started kicking in. And then you had the same thing where
consumers rushed to buy EVs before the end of the EV tax credit at the end of September. And so
in terms of structuring deals, obviously the loss of the EV tax credit could alter how
how OEMs play out their incentives. For example, are some going to
will leasing of EVs be as heavy? Are they going to push that as much? Because that was a tax
credit they could claim. That kind of remains to be seen. I think right now the biggest thing was
really just the rush of demand it caused. Now, of course, that's then kind of obviously faded,
which left dealers kind of doom and gloom in the most recent Cox survey. Gotcha.
Now, Paige, you cover group one. How did the publicly traded groups navigate this volatility
compared to independence? So I think it's a really different question when you are such
a large dealership group compared to say some of the smaller groups that if you're a small group
that maybe owns three Ford stores, that's a very different type of strategy than if, you know,
a large, large group like group one that encompasses many brands all over the country.
And I think one of the themes that came up a lot in our tariff coverage of the publics this year
was uncertainty. You know, it's kind of unclear often where these tariffs will impact, you know,
will the automakers take on the cost? Although in a lot of places they did,
you know, will we see price like parts prices increase? But I think a lot of the publics focused
on being as nimble as possible, you know, really focusing on their core profit centers
and just being ready to move and change if the time came. And for the most part, you know,
we didn't see any true terrible impacts on the publics this year, at least so far.
And Melissa, dealer sentiment in Q4 was the worst since COVID. What's driving that pessimism?
Well, I would say one thing with that to note is during when dealers were surveyed, it was in the
middle of the government shutdown, the longest one we've had. And I think that was, again,
uncertainty. There were a lot of questions about when the government was going to go back to work.
So I think they were a little bit more pessimistic, maybe, than they would have been
if you had surveyed them now. But John, I would imagine you might be able to talk a little bit
more about that. From what the Cox analysts were saying, it might be just the dealers coming off
of the boom times of, you know, before the tax credit, everybody was going out and buying all
their vehicles. And then, you know, that kind of slowed down now that the rush to beat the deadline
ended. And so they're kind of comparing it to that. There's also the profitability for
off vehicles have been slowly declining over a long period of time. And so,
but it's still better than pre-pandemic levels. But I mean, there could be a bit of that
affecting their outlooks. Got you. Now, Dan, fixed ops has always been dealer safety net.
Was that true in 2025? For the most part, I would say, yes, it was true. I think, you know,
the dealership service department still struggle with customer retention and keeping those customers
from straining to chain or independent repair facilities somewhere. And you mentioned the
Cox dealer sentiment, it was positive, still positive and optimistic territory, but it also
was less optimistic than it has been in the past. I have to think that their, you know,
and so, you know, repair bills are going up. And so people either stayed away,
they are putting off repairs, or they're trying to go find a cheaper alternative. And they,
for, you know, true or not true, they view dealerships as more expensive than, you know,
a chain store of pet boys or a Goodyear down the street. And so, while I think there were
still profit centers for dealerships, I think they were not as much as they have been in the
past. But again, this is a resilient group. And I think they'll, you know, kind of figure out how
to keep, you know, cars coming in and making money for dealerships. Now, let's pivot to
the retreat of EVs and the surge in hybrids. Now, John, the end of the $7,500 tax credit
was a turning point. Can you walk us through what happened? Again, the customers that if you're
going to go buy an EV, you obviously wanted to lock that in before the tax credit went away.
And so, you saw, I think these are preliminary numbers from JD Power for October, but basically,
EVs were like 13% of sales in September. Then they crashed to 5.2% in October. And that's the
end of the tax credit right there. I mean, you know, the customers bought them early,
and then without that, there wasn't any, it wasn't stimulating the demand.
Paige, how are dealers adjusting their inventory strategies now?
I think it's really a question that varies across the country. It depends on where you are and what
the EV market is like in the area you are. I recently spoke to a dealer in Alexandria in
Virginia right outside DC. You know, he's pretty confident they're going to continue to sell a
decent amount of EVs. But, you know, in other areas of the country, that probably won't be the case.
And, you know, I think another factor is the affordability equation. You know, EVs aren't
necessarily the cheapest cars out there. But with the tax credit and some of those leasing
incentives, they could be pretty affordable. And so, someone who, you know, maybe came into the
dealership looking for the best deal that they could get might have been convinced to get an EV
just because that really was the best deal. But without those credits, if you're in a place that
doesn't have a ton of charging or where you have to drive really long distances, then if you don't
have that affordability bonus, that doesn't make as much sense. And so, I think dealers really
have to reevaluate what their customers need and that changes without the tax credit. And
we will also all be waiting to see, you know, the demand, as John said, cratered in October.
Does it come back? And how fast? And what does that look like? You know, is everyone going to
hybrids now? I think there will be a period of, for everyone, waiting and seeing before we can
even really make some long-term predictions on strategy there. So, so far, I've been hearing a
lot of wait and see. Well, piggybacking off of Paige's answer, Melissa, now is the EV retail
model just fundamentally broken or just on pause? I think it kind of depends on the customer
and the brand. I think, you know, there will still be demand for EVs among certain customers,
maybe more in the luxury space where the buyer can afford maybe a little bit more and spending
a little bit more money on that. But I think it could depend on the brand and the way they buy
the vehicle could change. Gotcha. So, Dan, dealers spent hundreds of thousands of dollars on EV
infrastructure. Are they getting any return on their investment? They're getting some return,
but not full return. They, you know, a lot of the automakers, a lot of the manufacturers told them,
you're going to need to be ready for this. And so, a lot of service departments built special
bays or, you know, kind of made, you know, the EV bays are a little bit bigger than a normal one.
They put a lot of safety equipment in, they installed chargers in the front of the dealership,
all in anticipation that there was going to be, you know, kind of a lot of EVs to service in the
future. And there still, you know, there still are some, but not nearly the amount or that they
kind of expected. So, I think there's a little bit of grumbling that they spent a lot of money
and have not really had to use them very much. So, no, but, you know, but if, you know, EVs
continue to pick up a little bit, then, you know, eventually I suppose that they'll, you know,
some of that return on that investment. Now, John, NADA scored a major victory getting Biden
error rules tossed. What was that stake? The Federal Trade Commission's CARS rule
got thrown out in court on it, really on a technicality, just that the FTC hadn't followed
kind of the right administrative process in creating it. There was kind of two major components.
One was dealers would have been required to have greater transparency about what the actual price
of their vehicles were. I mean, you would have to list the kind of the all-in price with the
exception of, you know, government like taxes and fees on advertisements like your website.
And there was, there was also a requirement to do, you know, have like, you know, disclosure
after disclosure about what the, you know, what the vehicle's price would be at certain points,
you know, with or without the, you know, like FNI products and things like that.
The problem was that it was, the process they had kind of worked out was a little bit clunky and
that was, so, you know, it could have kind of complicated how dealers interact with customers.
So, you know, in terms of when the disclosures had to happen, how much paperwork would have been
involved with the whole thing. So in that sense, they've kind of, you know, they've kind of dodged
on that one. The offering price concept though, I mean, that's in a lot of states. So that,
that could be one where eventually it just gets adopted more and more. So it might,
they might have a temporary reprieve from that one.
Paige, does regulatory relief actually move the needle financially for dealership groups?
I think it's complicated. I think changing a regulation, especially if it involves,
you know, creating new forms or new procedures and like that costs money. Training, time,
all of that does cost money. But if it's something a dealership has already implemented,
it might not be worth it to unimplement it unless the process is truly like difficult.
And I think, you know, something that is important to emphasize is the federal government,
the federal regulators have taken a step back, but in a lot of states, state regulators have
really stepped up to fill that gap. So anyone who is maybe, I think most dealership compliance
lawyers would have said like, Hey, don't like think it's a free for all now, you know, your
state regulators, especially in states that are pushing back against the current administration,
we're really keeping an eye on the dealerships right now and, you know, really wanting to fulfill
the gap left by some of the federal agencies. So it's, you have to be constantly vigilant to
keep up with that kind of stuff and really aware of like the local regulations and stuff like that.
And so some of this, like not having to implement the cars rule probably saved the dealers some
money this year. But in California, they got their own new version. So maybe that didn't matter too
much to them. And, you know, I think a lot of them like to champion that and celebrate that. But I
think the actual compliance equation is pretty complicated when you break it down state by state.
Mark Homer, you've been waiting patiently. So Mark, Amazon autos jumped into use cars this year.
Should dealers be worried?
Not yes. That means that they're just getting into it. They're kind of ironing out the glitches.
They're probably making mistakes. They're seeking feedback and at an event where the Amazon autos
had spoke, I saw her speak in Denver earlier this fall. She basically apologized and said,
please be patient with us and give us feedback. So while it's too soon to tell, it's not a crisis
yet. But Mark, if you were to look into a crystal ball, how big of a threat is Amazon to traditional
shopping sites like the car gurus, the auto traders, the cars.com? It's funny to say that
because not that long ago, those were the upstarts and now they're the diehards. But
in any case, it's a variation of not yet because they have established spaces and systems in place.
They have slightly different goals. I think over time, they could chip into their business
if they do it right. So the key is going to be if Amazon can ramp up properly and reach
dealerships and customers the way they both respect the culture and the sensibilities that
they have. Melissa, does Amazon disrupt dealers or just change how customers find them?
I do think that customers would find them via a different way, which could disrupt a little
bit of their business. But I think a lot of them that have dealers that have signed up
are really seeing this as more a lead generator, kind of like the other sites that they're using,
like auto trader, car gurus, etc. So we'll see. I think Mark was right. We'll see over time if
they really refine their processes and if more dealers sign up, it could change. And if more
brands per se, for instance, also pair with Amazon. I got another one for you, Melissa. This is more
on the buy sale side of it. But will this affect dealership valuations if customer acquisition
gets more expensive? It could. Maybe I think it would be very dependent on the brand.
So I don't think it would be across the board. That's all for this episode of Daily Drive.
We're off tomorrow for the New Year's Day holiday. Come back on Friday when we'll continue our look
at the retail trends and topics throughout 2025 with a focus on AI, M&A, and service and parts.
Dealerships have been cautious about AI and those that are adopting it are not going all
out all at once. Thanks to Automotive News executive producer Jake Nier for his help on today's
podcast. You can get the latest news on auto retail, government regulations, and everything
happening in the auto industry at AutoNews.com. We'd love to hear from you. Let us know what
you think of the show and the topics we cover today. Send us an email at dailydrive at AutoNews.com
or leave us a voicemail at 313-444-2774. And if you enjoyed the podcast, remember to like,
About this episode
The automotive retail landscape in 2025 was marked by a mix of optimism and challenges, including tariffs, consumer affordability, and the impact of AI. Senior editors from Automotive News discuss how dealers navigated these hurdles, with many remaining profitable despite a decline in EV sales following the end of tax credits. The episode also explores the implications of Amazon's entry into the used car market and the ongoing regulatory battles that dealers face, highlighting the adaptability of the automotive retail sector amidst uncertainty.
Daily Drive's year-end series shifts to the automotive retail landscape in 2025. The Automotive News retail team breaks down the year's biggest retail stories, from dealers' regulatory wins and losses to the expansion of Amazon Autos and evolving dealership dynamics.
