Cox Automotive: ten factors that will impact the 2025 new vehicle market

The 2025 Cox Automotive Industry Outlook believes ten overwhelming themes will shape the Australian new vehicle in the next twelve months, and it will again be a market of two halves as in 2024.

The first factor will be an oversupply of vehicles, which will lead to excess inventory, increased market day supply (MDS), and more discounting and margin pressure.

According to Cox Automotive, matching sluggish BEV demand to steep manufacturer targets will be the second issue for some OEMs. The third factor is a product avalanche from China-based OEMs that see Australia as a lucrative market.

Cox Automotive says the fourth factor will be the tepid private demand in the second half of 2024 and the degree to which it continues into 2025. Factor five is the Reserve Bank’s cash rate cuts and their potential stimulation of private new car sales. 

Factor number six will be the fringe benefit tax exemptions for plug-in hybrids ending in April, affecting the uptake of novated leases. The lead-up to the Federal Election in April or May is the seventh factor which will likely impact new vehicle sales to government and corporate fleets. 

The strength of the Australian dollar against the US dollar, the Japanese Yen, and the Thai Baht is the eighth factor that will also affect the 2025 new vehicle market. The ninth will be the impact of the New Vehicle Efficiency Standard legislation, which will take effect on July 1, 2025.

Post-COVID population growth will be the tenth factor affecting the 2025 new vehicle market. From June 2023 to 2023, 552,000 people arrived in Australia, and 445,600 migrated overseas.

A good year for buyers but not franchise dealers

According to the Cox Automotive Industry Outlook, headwinds in the private and fleet market, coupled with ample supply and aggressive Chinese OEMs, will exert downward pressure on new vehicle pricing in the first half of 2025.

Clearance of MY23 and MY24 inventory will put downward pressure on prices, but as the year progresses, there will likely be an imbalanced supply against lingering demand.

New vehicle franchise dealers under pressure to move inventory will likely suffer ongoing margin compression and higher running costs, and OEMS will need to incentivise. 

Cox Automotive says franchise dealers must strengthen their used vehicle sales and fixed operations. This is nothing new, but their effort needs to double in 2025.

Stable wholesale market remains strong

Cox Automotive is forecasting double-digit volume growth in the 2025 wholesale market, but not relatively as high as the 36% increase in 2024.

Social media marketing campaigns will increase the growth in private buyers’ purchasing vehicles from wholesale auctions.

The first few weeks of 2025 have seen growth and much-improved year-on-year clearance rates. 

Substantial numbers from fleet management organisations have buoyed the wholesale market and dealer trades as floorplans fill up.

While younger vehicles are under price pressure, wholesale prices of cars aged five years and older, particularly hatchbacks and sedans, will stabilise the overall price index.