Moody's Talks - Inside Economics Cruise Controls or Smoke Signals
Jul 18, 2025
Jonathan Smoke, Chief Economist for Cox Automotive, and Michael Brisson, Director at Moody's Analytics, dive into the automotive landscape. They discuss the impact of tariffs on production and pricing, dissecting their differing views on auto credit's future. The pair highlight trends in vehicle sales, driven by consumer fears and economic pressures like rising auto loan delinquencies. Additionally, they examine how wage growth interacts with consumer behavior in a volatile market, offering key insights into the industry's outlook.
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Auto Market Resilient Yet Risks Loom
- The auto market has been resilient despite tariffs and has so far avoided significant decline.
- Consumers and businesses hesitate to act until tariff outcomes become clearer, risking a future slowdown.
Tariffs Trigger Buying Spike Then Drop
- New vehicle sales spiked with tariff news and incentives but have since retreated to previous levels.
- Price increases expected will lower demand and pull-forward buying suggests future softness ahead.
Manufacturers May Cut Low-Cost Models
- Manufacturers may eliminate low-cost, price-sensitive vehicles affected by tariffs rather than raising prices.
- Uncertainty about tariffs' final shape suppresses consumer buying, creating a weak retail market with higher incentives.