Dealers are always optimists, and they are feeling good about a new administration that seems to be pro-business. However, while it is still early days, it appears the policies may be a mixed bag where boosting the retail auto industry is concerned.

“It is still a very healthy environment,” Jeremy Beaver, president of the Del Grande Dealer Group in Northern California, tells Getting to Go! “Pending any bad macro-change, it is going to be a healthy year. Not gang busters, but dealers can still make money.”

The Q1 2025 Cox Automotive Dealer Sentiment Index, which polled dealers in January and February, found franchised dealers see the market as strong, with a score of 54, higher than the Q4 2024 index.

The market outlook index rose to 58, the highest score since 2022.

Dealers are hoping they will face less regulation under the new administration. That is one big impact the new administration will likely have on the automotive market, Brian Finkelmeyer, senior director of enterprise insights at Cox Automotive, writes in “Will Trump Make the Auto Industry Great Again?”

Emissions standards, for example, are likely to be eased. That will be good for some automakers, not so good for others, Finkelmeyer says.

Those that have heavily invested in EV production, such as Ford, would rather the standards stay in place, he says. But others, such as Stellantis, that have spent billions to acquire emission credits, will benefit if standards are eased.

“I believe the benefits of reducing the aggressiveness of the standards will outweigh the downside of keeping them,” Finkelmeyer says.

Consumer confidence conundrum

Consumers were feeling confident in January. But by February, in the face of continuing inflation and federal layoffs, that confidence began to wane. U.S. consumer confidence plummeted to an eight-month low in the Conference Board’s February survey.

Uncertainty is taking its toll. Cox Auto expects “another year of slow growth” in 2025, with new vehicle sales rising to 16.3 million, up from 16 million in 2024.

Still, “there is still room for growth” in the new vehicle market, DGDG’s Beaver says. He sees the used market in 2025 as “relatively stable and flat.”

Truist Securities’ dealer clients see the new vehicle market as “stabilized” and the used market as “predictable,” James “J.T.” Taylor, managing director of automotive investment banking at Truist Securities, tell Getting to Go!

“The threat of tariffs notwithstanding, it appears to most dealers that they can plan their businesses with a higher degree of certitude than they have been able to since 2019!” Taylor says.

The big unknown

There is a big macro question, Beaver says. “The tariffs, for one, could have a big impact on affordability and costs” he says.

The new administration has imposed 25% tariffs on all imports from Mexico and Canada, despite the existence of a free trade agreement.

Mexico produces 16% of all vehicles sold in the U.S. and another 7% are produced in Canada, Cox Auto’s Finkelmeyer notes. Then there is the $200 billion in auto parts made in Mexico.

“New tariffs will only compound the current affordability crisis for auto shoppers,” he says.

Other tariffs that will add to a vehicle’s cost have taken affect. The 25% tariff on steel and aluminum imports will also likely be passed on to consumers in part.

They may sound sanguine, but dealers are worried about the impact of tariffs, Joe Roesner, president of The Fontana Group, tells Getting to Go!. The Fontana Group is a consulting firm specializing in the retail automobile industry.

“Generally, my clients are feeling optimistic going forward,” he says, “but there is concern about what effect tariffs could play on vehicle pricing due to potential increase in costs.”

Still, dealer optimism may persist. If new car sales slow due to higher prices, dealers will find a way to grow service and parts business, or another area, Beaver says. “Dealers figure out a way,” he says.

This article was written for Getting to Go, a buy/sell newsletter from Scali Rasmussen.