The automotive industry saw light-vehicle sales increase by 2.4% in 2025. ICE sales declined marginally compared to 2024, down 0.2%. Electrified vehicle sales grew 12.7%, led by 27.6% growth in hybrid sales. EV sales, inclusive of hybrids, PHEVs, BEVs, and FCEVs, captured 22.0% of the US light vehicle market – over half of which were hybrids.
After a surge in BEV sales in the third quarter as consumers rushed to purchase BEVs before the EV incentives ended at the close of September, sales plummeted in the fourth quarter. Fourth quarter BEV sales fell over 40% compared to the previous quarter, ending the full year up just 1.2% compared to 2024.
On a broader economic scale, the U.S. economy increased in the second quarter of 2025, up 4.4% from the previous period (at an annualized rate). This growth reflected an increase in consumer spending, exports, government spending, and a decline in imports. The Fed held rates steady in January after three consecutive cuts at the end of 2025.
The Federal Open Market Committee (FOMC) noted economic indicators suggested economic activity is growing at a steady pace even as job gains remain low and the unemployment rate, while up, remains historically low with some signs of stabilization. However, inflation remains somewhat elevated.
U.S. consumer confidence indices were mixed but remain well below December 2024 levels. Pocketbook issues are top of mind for consumers, with plans to purchase new vehicles within the next 12 months continuing their downward trend through the fourth quarter.
There are headwinds for the 2026 outlook. Tariffs expected to show up more in consumer vehicle prices and the pull-ahead of sales in the spring and late summer of 2025 may translate to weakened demand. Continued uncertainty in trade and tariffs – the USMCA review in particular – weighs on the outlook. However, lower taxes, relaxed regulations, and higher-than-expected 2025 tax returns could help drive vehicle demand.
