Auto Industry Shifting Gears During a Rough Ride

Experts predict intensifying dealer competition in 2026.

Several car models are seen lined up. Mikbiz/Shutterstock

The U.S. automotive industry experienced significant changes in 2025 as the expiration of electric vehicle (EV) subsidies, the introduction of tariffs, and regulatory rollbacks reshaped both demand and supply.

The shifts pushed the market away from EVs toward hybrids and traditional internal combustion engine vehicles, while also favoring domestically produced models over foreign-made cars.

Elevated inflation, persistently high long-term interest rates, and signs of a weakening labor market further weighed on demand for big-ticket discretionary purchases such as automobiles.

“Consumers had been holding on to their cars longer; financing more mindfully; and questioning whether new technology was worth the extra cost,” Joe Zdrilich, lead attorney at Zdrilich Injury Law, told The Epoch Times.

Sales Spikes Followed by Slumps

After a surge in March ahead of tariff announcements in April, U.S. auto sales trended lower for the rest of the year, with the decline accelerating in the fourth quarter after federal EV tax credits expired.

Preliminary November data from MarketLines showed vehicle sales declined at an annual rate of 6.7 percent, indicating the downtrend continued into year-end. Hybrid vehicle sales rose 13.6 percent during the period, while Tesla’s sales for the month fell 30.7 percent year over year, marking a second consecutive monthly decline.

Sales of overseas-manufactured vehicles from European, Japanese, and Korean automakers also declined sharply during the year.

Total new-vehicle sales for December, including retail and non-retail transactions, are expected to reach 1,454,000 units, representing a 7.5 percent year-over-year decline, according to a joint forecast from J.D. Power and GlobalData.

“December caps a year marked by volatility, as the industry continues to deal with the consequences of import tariffs and changes to electric vehicle legislation. To say it’s been a sales roller coaster of a year would be an understatement,” J.D. Power stated.

The firm added that fears of impending tariff-related price hikes drove sales up by 173,000 between March and April, and that 304,200 electric vehicles were sold between August and September ahead of the Sept. 30 expiration of federal EV tax credits. Each surge was followed by a slowdown in subsequent months.

Shifting Consumer Preferences

The rapid changes in 2025 were reinforced by shifting consumer preferences that began in 2024, according to Deloitte’s 2025 Global Automotive Consumer Study (GACS), conducted from October through December 2024.

The study found that, even in 2024, interest in all-battery electric vehicles (BEVs) remained muted in most markets, while demand for internal combustion engine and hybrid cars increased.

According to the Department of Transportation, hybrid sales rose by nearly 50 percent from 2023 to 2024, while EV sales grew only modestly. Analysts expect that trend to persist following the expiration of government EV subsidies.

Traditional hybrids, which combine gasoline and electric power, continue to attract buyers due to established fueling infrastructure, improved fuel efficiency, better performance in extreme weather, and more predictable resale values, according to an August Kelly Blue Book report.

Interest among manufacturers in expanding production of internal combustion engine vehicles also accelerated following a July proposal by the Environmental Protection Agency (EPA) to rescind the agency’s 2009 Endangerment Finding, which had regulated greenhouse gas emissions from vehicles and underpinned numerous climate-related rules.

The EPA has said the regulations increased uncertainty and production costs for automakers, limiting affordable vehicle options and weighing on profit margins. In early December, the White House also announced that the Trump administration would reset Corporate Average Fuel Economy (CAFE) standards.

Automakers have already begun adapting to the new environment by reviving legacy models, emphasizing hybrids, and writing down EV investments.

Stellantis announced it would bring back the Ram Hemi V8 engine and pivot toward traditional hybrids rather than fully electric vehicles, citing regulatory rollbacks and rising consumer demand. CEO Antonio Filosa outlined the strategy on Dec. 4 at the Goldman Sachs Industrial and Auto Conference.

Filosa said shipments of trucks equipped with the Hemi engine are expected to rise through the remainder of the third quarter and accelerate from 10,000 to 20,000 units in the fourth quarter.

Other automakers have also welcomed the EPA proposal.

Ford CEO Jim Farley said during an earnings call that the company had already saved nearly $1.5 billion in emissions-credit purchases and that “further changes will balance standards and customer choice, and have the potential to unlock a multibillion-dollar opportunity over the next two years, primarily in Ford Blue.”

“Ford Blue” refers to the company’s internal combustion engine vehicle division.

Last week, Ford also announced a $19.5 billion write-off after discontinuing several EV models.

Additional insights into consumer behavior were highlighted in Simon-Kucher’s Global Automotive Study 2025, which surveyed 6,780 buyers across 20 markets.

The study found that buyers are holding onto vehicles longer, moving away from one-size-fits-all EV strategies, prioritizing human interaction over AI in closing deals, and placing greater value on service contracts and maintenance. New brands are gaining traction, challenging established automakers, while tariffs increasingly influence purchasing decisions.

Forecasting 2026

Sam Sullivan, who operates Cardog, a vehicle search platform tracking more than 23,000 U.S. dealerships, told The Epoch Times that he expects EV prices to fall another 10 percent to 15 percent as dealers clear inventory ahead of new budget models in 2026. He also anticipates hybrid market share to grow by more than 20 percent as buyers hedge between gasoline and electric options.

Tom Gartland, chairman and CEO of Montway Auto Transport, said competition among dealers is intensifying nationwide.

“In 2026, we will see consumers embrace shopping for and purchasing both new and used vehicles from across the country,” Gartland told The Epoch Times.

“Online car buying, remote work flexibility, and lifestyle mobility will increase demand for long-distance, door-to-door car shipping,” he said.

“Providers that are equipped with predictive, automated platforms and established carrier networks will be well-positioned to manage these surges, while those without forecasting tools will struggle to keep up.”