Q2'25 auto sales: The sugar high quarter

But the growth seen this quarter is unlikely to reflect organic demand. Instead, it’s the aftershock of a widespread inventory pull-forward that occurred in March ahead of the official implementation of 25% tariffs on imported vehicles (April 3) and automotive parts (May 3).

A quarter of borrowed time

Ford, General Motors, Toyota, and Honda all posted solid year-over-year Q2’25 sales gains in North America. Each of these companies operates multiple US-based or North American final assembly plants, which allows them to qualify for full tariff exemptions, navigate USMCA compliance, or at minimum receive a 3.75% rebate on a vehicle’s aggregate Manufacturer’s Suggested Retail Price (MSRP) rebate until May 2026.

Meanwhile, Subaru, Nissan, and Mazda quarterly sales all declined over the same period. Not coincidentally, all three have limited or exclusively Mexican assembly footprints. Mazda only builds in North America at the company’s Salamanca plant, Renault-Nissan-Mitsubishi operates six plants – half in Mexico, and Subaru has one facility in Indiana with a smaller network than all the other carmakers.

Hyundai is something of an outlier: though its North American footprint is modest, with only four plants (just one in Mexico), the company still outperformed Nissan, it’s closet rival in terms of plant count, suggesting a windfall from Hyundai’s reliance on US-based plants in the company’s US/Mexico plant split.

It’s worth noting, that Mexico may qualify for exemption under USMCA content rules, but it does not qualify for the temporary 3.75% rebate that applies to vehicles built with imported parts but with the final stages of assembly based in the US That provision was laid out ahead of the application of auto part levies on May 3.

Origin of assembly

Despite the strength in sales, domestic auto production figures from the Federal Reserve show declines in April and May compared to the prior year periods. Similarly, production of auto parts and allied goods, which includes powertrain and chassis components, was mostly flat-to-lower in April and May on an annual basis.

Meanwhile, motor vehicle assembly rose during the same period. That suggests a growing share of vehicles are being assembled from pre-imported parts, rather than built from the ground up in North America.

Inventory figures complicate the picture. On a year-over-year basis, domestic auto inventories still appear lean, a holdover from post-pandemic behavior, when automakers deliberately ran tight due to subdued production rates and an aversion to holding high-cost vehicles in stock. But April and May inventory figures rose sequentially, the first sustained increase that broke a mostly downward trend since a three-year high a year ago, when inventories seemingly reached its first post-pandemic ceiling.

Proximity buys time

The sales growth in the latest quarter is likely not organic.

In the first quarter of the year, sales surged, driven largely by inventory build-up in the month of March.

Now, automakers with robust US assembly networks – Ford, Toyota, General Motors – have posted strong results in the second quarter, while those relying on limited or Mexico-only final assembly saw sales declines. This early divergence reflects a sector transitioning into a new tariff regime, where eligibility for final assembly-based rebates or full USMCA compliance or domestic manufacturing shape competitive outcomes.

The first quarter was the result of a pull-forward in demand, while the second quarter was the outcome from a front-loaded benefit. Both complicate the outlook for downstream aluminum suppliers: auto body sheet rolling mills, structural and crash component extruders, and die-casters making wheels or a range of under-the-hood parts.

The key takeaway is that automaker-reported sales largely represent deliveries to dealerships, units that were often assembled earlier, cleared before or just after tariffs took effect, or are only now making their way through the pipeline. The pulse of automotive demand comes from the total vehicle sales to end consumers, as tracked by the Bureau of Economic Analysis – and that figure has plummeted over the same April-May window.

That widening gap between dealer-level purchases and end buyer activity will reverberate back up the supply chain. And those with the smallest domestic footprint are just the first dominos to fall – not the only ones at risk, just the first to take the hit.

Third-quarter figures will reveal just how many vehicles were actually sold, not just how many were shipped out.