Inflated Light-Vehicle Inventories Set to Decline to 2.3 Million Units Next Month: NADA

DETROIT, July 18, 2025 — Swollen new-vehicle inventories, mostly with unsold Electric Vehicles (EVs), reflect subdued sales in the US markets.

With flat automotive sales in May and a marginal increase in sales during June, inventory levels rose and new model year vehicles began to pile up stocks at the dealerships.

As per the National Automotive Dealers Association, or NADA, new light-vehicle sales in June 2025 totalled a SAAR of 15.3 million units.

The June 2025 SAAR represents an increase of 2.3 percent compared to June 2024.

Higher Sales Due to Base Effect

A certain base effect has come into picture, as sales in June 2024 were impacted by a major dealership-software outage that limited sales a year ago, as per NADA.

While some automakers have ramped up production, others have slowed down rolling out new vehicles.

This is largely due to the auto tariffs that have caused production shifts and disruptions.

As a result of these disruptions and the strong sales performance in March and April, new light-vehicle inventory has fallen month-over-month recently.

New light-vehicle inventory on the ground and in transit totalled 2.57 million units at the start of June, and total inventory levels are likely to be flat or down slightly once final data are available, NADA data revealed.

Inventory hit a high this year in February at 2.78 million units, but it is unlikely to see inventory that high again this year.

According to Omdia (formerly Wards Intelligence), new light-vehicle inventory is forecast to decline to 2.3 million units by the end of August before rising back to roughly 2.5 million units by year-end.

Notably, President Trump's 25 percent tariff on imported autos prompted a surge in new vehicle-buying during the early spring as consumers were keen to avoid paying more in view of the anticipated price increases from the levies.

The sales fell off substantially in May and dropped again in June.

Lower Production, Lesser Sales

As per NADA, it will closely track the second half of the year to gauge automotive sales trends, in particular car sales.

“We will be closely watching the resilience of the American car buyer. Our outlook is for sales to decline in the second half of the year after the strong performance in the first half,” said NADA outlook.

“We expect consumers may wait on the sidelines until there is more certainty with trade policy and its effects on new light-vehicle prices and vehicle availability. Overall, we expect lower North American new light-vehicle production, lower new-vehicle inventory levels and a slower sales pace compared to the first half of the year and compared to our pre-tariff expectations. Our forecast for new light-vehicle sales for all of 2025 is 15.3 million units,” it said.

Incentive-Driven Sector

Incentives are pivotal to help the auto industry clear inventory by making vehicles more affordable for consumers, triggering additional sales.

New vehicle incentives during Q3 reached 7.7 percent of the average transaction price, increasing more than 60 percent year-over-year, according to Cox Automotive. However, incentives remain significantly below pre-pandemic levels, which often exceeded 10 percent before COVID struck, according to Kelley Blue Book.

“OEMs are increasing incentives slowly to safeguard their profit margins, while dealers are discounting more and earning lower profits,” Tyson Jominy, Vice President of Data and Analytics at J.D. Power said.

According to J.D. Power, average incentive spending per unit should total $2,727 in June 2025. As inventory becomes scarcer, we expect to see OEMs pull back on their incentive spending in the coming months. J.D. Power also notes that the average monthly payment on a new-vehicle finance contract should total $747 in June 2025, up $22 year over year and the highest on record for the month of June.

New light-vehicle inventory is forecast to decline to 2.3 million units by the end of August, before rising back to roughly 2.5 million units by year-end.

Inputs from Saqib Malik

Editing by David Ryder