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Tariffs and Expiring Federal EV Tax Credits Fuel Affordability Challenges in Auto After H1 Sales Boom, According to Cars Commerce's Industry Insights Report

1. Imported vehicle prices rise while U.S.-built vehicles drop nearly $200 on average. 2. Entry-level vehicle segment shrinks, impacting affordability for consumers. 3. Federal EV tax credit expiration impacts EV purchase decisions significantly. 4. Used car prices rise amid increased trade-ins creating diverse inventory. 5. More consumers favor American-made vehicles due to tariff concerns.

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FAQ

Why Bearish?

With rising import prices and decreasing U.S. vehicle prices, CARS may experience lower demand. Historical patterns show that affordability and tariffs heavily influence car buying behavior.

How important is it?

With significant changes in vehicle pricing dynamics and consumer behavior due to tariffs, CARS's market positioning may be directly impacted. The emphasis on local vehicle production amidst tariff pressures adds a layer of urgency in consumer choices.

Why Short Term?

The immediate expiration of EV tax credits will likely cause quick shifts in consumer purchasing behavior. This aligns with historical trends before similar tax and market changes.

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Imported Vehicle Prices Rise While U.S.-built Vehicles Drop $200 on Average , /PRNewswire/ -- Cars.com Inc. (NYSE: CARS) (d/b/a "Cars Commerce Inc."), an audience-driven technology company empowering the automotive industry, reveals how federal policy shifts are reshaping the new and used car market in its Industry Insights 1H Report. This comprehensive report draws on consumer demand data from Cars.com's more than 29 million in-market shoppers and vehicle supply and pricing data from millions of new and used vehicles on its marketplace. It is also informed by Cars Commerce's aggregated platform data, which includes 140 million monthly consumer intent signals from more than 7,000 retail dealer websites and supply data from across the company's retail websites, trade and appraisal solution and wholesale auction platform, providing broad automotive insights on supply and demand. "The SAAR spiked above 17 million in March and April, but that pace has slowed, signaling the pre-tariff buying activity has passed," said David Greene, industry analyst at Cars Commerce. "With price hikes on many imports starting to emerge, the $7,500 federal EV tax credit set to expire in September, and the entry-priced segment now shrinking for three consecutive months, affordability remains the biggest challenge to continued growth. How automakers respond in the second half — through pricing, production and incentives — will shape the road ahead." On a positive note, average new vehicle prices have increased only slightly — just under $100 since January. New U.S.-built vehicle prices are down nearly $200 on average. According to Cars.com data, more than half of consumers say tariffs have influenced them to seek out American-made vehicles, and over 73% would consider buying U.S.-built vehicles to avoid added costs.1 As affordability concerns persist, consumers are turning to tools like Cars.com's American-Made Index, which helps shoppers know which vehicles contribute most to the local economy. Tariff-related pricing impact is a mixed bag and varies by country. Imports from the U.K., a segment that accounts for just 1% of available inventory, saw the most significant jump of more than $10,000. EU imports, which makes up approximately 5% of inventory, rose by almost $2,500. Meanwhile, prices fell for vehicles from China, Canada, and South Korea. Entry-Level Vehicle Segments Are Shrinking Inventory of new vehicles priced under $30,000 — the most tariff-sensitive segment — averaged 13.6% share in the first half of 2025. This is down significantly from 2019, when entry-level vehicles made up 38% of the market and reflects the third consecutive month of declines. With 92% of these vehicles built outside of the U.S., tariffs are disproportionately affecting this entry-level tier, which relies almost entirely on foreign-built vehicles. Only two models in this segment are built in the U.S. – the Honda Civic and Toyota Corolla – while some are also produced in Japan. While overall new car units grew 5.6% year over year in the first half of 2025, the entry-level segment lagged behind at just 3.9% growth in the same time period. The mid-range new car segment ($30,000 to $49,000) accounts for nearly half of all inventory — and within this tier, 50% of the vehicles are imported. Within the $70,000-plus new car segment, the share of imported vehicles increased from 40% in May to 41% in June, suggesting automakers are adjusting for less price-sensitive consumers. EV Incentives Expiring as Prices ClimbEV buyers face their own deadline with roughly 75 days left to save thousands before the federal EV tax credit for new and used vehicles is set to expire. With the average new electric vehicle priced at $65,000 —the federal EV tax credit is up to $7,500 for new vehicles and $4,000 for used– is a critical factor in purchase decisions. According to a Cars.com survey, 53% of current EV owners cited the credit as one of the main reasons they purchased their vehicle, and 48% of current EV shoppers say the incentive is influencing their decision.2 Used Market Rebounds With More 'Young' Trade-InsAmid rising new-car prices, used car prices rose nearly 3% in H1 QoQ, reflecting changes in supply dynamics and continued demand for more affordable vehicle options. Used inventory increased 2% year over year in the first half of 2025, largely driven by a wave of trade-ins during the new-car buying jump in March and April, which was prompted by tariff-related concerns. This influx brought newer, lower-mileage vehicles into the used market, contributing to a faster turnover rate: the average time on dealer lots is down nearly 5% year over year. To download the full report, visit www.CarsCommerce.inc. 1Cars.com Consumer Survey; May 28-June 6, 2025; 997 respondents2Cars.com EV Shoppers and Owners Study, May 21-June 17, 2025; 1,059 respondents *Cars Commerce internal data ABOUT CARS COMMERCECars Commerce is an audience-driven technology company empowering the automotive industry. The Company simplifies everything about car buying and selling with powerful products, solutions and AI-driven technologies that span pretail, retail and post-sale activities – enabling more efficient and profitable retail operations. The Cars Commerce platform is organized around industry-leading brands such as the flagship automotive marketplace and dealer reputation site Cars.com, award-winning website and digital retail technology and marketing services from Dealer Inspire, essential trade-in and appraisal technology from AccuTrade, a reputation-based dealer-to-dealer wholesale auction from DealerClub and exclusive in-market media solutions from the Cars Commerce Media Network. Learn more at www.carscommerce.inc. SOURCE Cars.com Inc. WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM? 440k+ Newsrooms & Influencers 9k+ Digital Media Outlets 270k+ Journalists Opted In

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