US auto sales seen dipping as market braces for war impact

Carmakers are expected to report lower first-quarter US sales, with the Middle East war adding uncertainty to an already weaker outlook compared with strong conditions a year earlier. The US-Israeli offensive on Iran, launched on February 28, has pushed oil prices up more than 50 percent, lifting gasoline prices above $4 a gallon and adding to affordability pressures. However, automakers and analysts say it is too early to gauge the full impact on sales. “At this stage, however, it’s too early to determine how the industry will be impacted,” Toyota said.

Cox Automotive estimates a 0.1 percent decline in Toyota’s first-quarter sales and expects drops of more than nine percent for both General Motors and Ford, largely due to a tougher comparison with last year. In early 2025, concerns over potential tariffs under President Donald Trump drove a surge in vehicle purchases.

Analysts say the extent of the Iran conflict’s impact will depend on its duration and whether it fuels inflation, prompting central banks to maintain or raise interest rates. “The current Middle East conflict adds tremendous amount of uncertainty to the vehicle market,” said Cox Automotive economist Charlie Chesbrough.

Edmunds projects US car sales of 3.7 million units in the first quarter, down 6.5 percent year-on-year, citing severe weather, geopolitical uncertainty, rising fuel costs and affordability challenges. Deutsche Bank expects no immediate impact from the conflict and forecasts full-year sales of 15.8 million units, down 2.5 percent from last year. Electric vehicle sales present a mixed picture. Analysts expect Tesla to deliver 365,645 units in the quarter, up 8.6 percent year-on-year but down 12.6 percent from the previous quarter. The outlook for EVs has been affected by the removal of US tax credits, though higher fuel prices could support demand.

Searches for EVs on Edmunds rose to 23.8 percent of customer queries in the week of March 16 from 20.7 percent at the end of February. However, sustained fuel price increases are typically needed to drive a significant shift, said Jessica Caldwell of Edmunds, noting many consumers view the current spike as temporary. Historically, oil shocks have sharply reduced auto sales, including declines of 44.7 percent after the 1973 crisis and more than 40 percent following the 1979 Iranian Revolution. Sales also fell 45.5 percent after the 2008 financial crisis and 12.7 percent after the 2022 Russian invasion of Ukraine, according to Anderson Economic Group.