In a new report out last week Deutsche Bank analysts led by Edison Yu provided an update on the U.S. auto sector, noting that sales in May reached a seasonally adjusted annual rate (SAAR) of 15.7 million units.
This figure came in slightly below their estimate of approximately 15.9 million, a result they attributed to a natural moderation following the particularly strong auto buying seen in April. They also pointed out that there may have been some seasonal distortions at play, as the absolute number of vehicles sold in May—1.475 million—still came in higher than the 1.449 million reported in May 2024.
The analysts observed that Ford benefited from stronger-than-expected sales, driven by the continued success of its employee pricing strategy, which helped the company gain 160 basis points in market share. Toyota also performed well, picking up 130 basis points in market share.
Mid-month data suggested that average transaction prices (ATPs) for the industry would decline month-over-month to approximately $46,000, although prices remain up 1.8 percent compared to a year ago. Meanwhile, incentive spending was down 11.5 percent month-over-month, a signal that vehicle demand remains robust even as some price moderation occurs.
As for inventory levels, the Deutsche Bank team reported that they remained stable at 46 days’ supply exiting the month. This is unchanged from April and represents a modest two-day improvement compared to the previous year. Most of the Detroit 3 (D3) and Japanese 3 (J3) automakers saw relatively flat inventories on a month-over-month basis, suggesting that the overall supply environment remains balanced.
Recall, back in April, Deutsche Bank’s note painted a more cautionary picture, centered on the significant uncertainty facing automakers due to the imposition of tariffs.
Just a month and a half ago, the analysts highlighted that automakers were scrambling to adjust their pricing, incentives, and production strategies to cope with a 25% tariff on imported vehicles and parts—effective May 3. The bank warned that despite the possibility of a short-term suspension, investors should assume all imported vehicles were subject to the tariff regime.
The April commentary also described a patchwork of automaker responses: Tesla paused Model X and S sales to China, GM halted operations at its CAMI plant, while Mazda, Mitsubishi, and Subaru took varying measures like absorbing some price increases or stopping U.S. inventory shipments. Ford’s broad employee pricing discounts—cited again in the June note as driving its strong sales—were already seen as part of its tariff-mitigation strategy in April. The bank estimated Ford and GM could each see gross costs rise by over $10 billion, with EBIT hits in the range of $4–7 billion annually, highlighting the potential severity of the tariffs’ impact.
In both notes, Deutsche Bank remained cautious about the broader auto sector. In April, they expected that front-loaded consumer buying (ahead of price hikes) would bolster sales early in the year but that the second half would suffer as tariffs took effect, projecting 2025 U.S. sales at 15.4 million units—down from 16 million in 2024. Interestingly, the June update’s 15.7 million SAAR for May suggests a somewhat stronger-than-feared demand environment—at least in the near term—though the underlying uncertainties around trade policy likely remain.
In other words, the dust appears to be settling and the U.S. auto industry appears to have ridden out the storm and is normalizing somewhat...for now...