Inside Automotive with Jim Fitzpatrick, powered by CBT News

Tom Kondrat on Regulatory Changes and EV Market Impacts

• Jim Fitzpatrick • Season 1 • Episode 37

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Electric vehicle demand has shifted dramatically with the expiration of federal incentives, and on this episode of Inside Automotive, Tom Kondrat, Global Lead for Advanced Analytics at Urban Science, breaks down what these changes mean for dealers and the industry. Kondrat shares insights on sales trends, regional differences, and consumer behavior as dealerships prepare for 2026.

Topics covered in this episode include:

  • October EV sales dropped 45% after federal tax incentives expired, following earlier pull-ahead demand
  • Plug-in hybrids saw a 50% decline, while traditional hybrids grew 15%
  • Regional differences in EV demand, with stronger sales in California and Florida compared to softer Midwest markets
  • Larger all-electric SUVs and pickups struggling, while smaller EVs like Tesla Model Y and Mustang Mach-E perform well
  • Implications of regulatory shifts, including CAFE rules and the One Big Beautiful Bill Act
  • Market trends for U.S.-assembled versus foreign-assembled vehicles and forecasts for Q4 2025 and early 2026

Kondrat emphasizes that while incentives impacted sales timing, overall industry performance remains strong, and dealers should plan strategically for evolving consumer demand.

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Announcer:

Welcome to Inside Automotive with Jim Fitzpatrick.

Jim Fitzpatrick:

Hey everyone, Jim Fitzpatrick. Welcome into another edition of Inside Automotive right here at the CBT Automotive Network. There was a lot going on in October. Today we are joined by Tom Kondrat, who's the global lead for advanced analytics at Urban Science, to share some of the data and what dealers should be watching as we head into the new year. So, Tom, thank you so much for taking the time and your busy schedule to join us on the show once again.

Tom Kondrat:

Thanks, Jim. It's always a pleasure.

Jim Fitzpatrick:

Sure. First, let's talk about EVs. How much of a drop are we seeing in EVs since the uh since the incentives went away?

Tom Kondrat:

It's been a roller coaster ride for EVs this year. Uh, you know, rolling up to the end of the federal tax rebate, we saw EV sales increase by about 30%. Yeah. Uh EV share increased to over 12%. Yep. And now in October, uh that roller coaster has hit the uh the bottom part of that curve. And now uh sales are down 45% for battery electrics in October. Yikes. Uh share has dropped to 5%. And quite honestly, it's not unexpected. Yeah. Because of all the pull ahead, all the activity we saw leading up to the end of that rebate. Um, it's really not too surprising, but yeah, it's it's been a major downswing in October for battery electric sales.

Jim Fitzpatrick:

And is that 45% for the same month as last year, or is it is it over uh September sales?

Tom Kondrat:

That's compared to October of last year. Okay. Down 45%.

Jim Fitzpatrick:

Okay. Yeah, that's that's pretty substantial there. But uh, and of course, it that that incentive or the end of that incentive pretty much cleaned the shelves out. A lot of the dealers that I have spoken to in October said, you know we don't have a lot of EVs on the lot for customers to even buy, right?

Tom Kondrat:

Yeah, you know, and that that uh conversation does vary place to place throughout the country, right? You go to the Midwest, they they probably still generally have quite a bit of inventory, but you go to places like Florida or California, the East Coast, and uh yeah, that's a different kind of conversation. So battery electric demand is a very geographically diverse uh topic to discuss, and it depends a lot on where you are, whether you're urban, you're rural, east coast, middle of the country, that kind of thing. Yeah, but yeah, it's it's been a crazy ride for dealers to navigate battery electric demand this year, and that ride continues. Yeah.

Jim Fitzpatrick:

What does the data tell you between the difference of uh of BEV vehicles and plug-in hybrid uh EVs? And of course the traditional ice vehicle sales as well.

Tom Kondrat:

Right. So plug-in hybrids have been running about 2% share. So we're talking uh uh a fairly small fraction of sales. Uh, you know, in in in my view, there it's a lot of that uh uh a lot of those programs were were designed around the the the California CARB uh kind of uh uh regulations, right, to meet compliance in those states. So uh so plug and hybrids fell pretty hard. They're down uh more more closer to 50% in uh in October. But but uh hybrids were up 15%. Of course, you know, hybrids were not incentivized with that federal rebate. So that's much more of a picture of natural demand and the uh the production investments from the manufacturers.

Jim Fitzpatrick:

Yeah, and as many have said, that the hybrids and the plug-in hybrids, it really uh is what will bridge that gap, right? Um between uh uh you know EVs down the road and and the ICE vehicles that that are on the roads today. That that's kind of a people kind of you know wading themselves into the EV water, right?

Tom Kondrat:

Exactly, right. Um, you know, I personally drive a plug-in hybrid vehicle. Um, you know, I love it. Uh I use very little gasoline. It's very convenient for me with the amount of miles that I drive in a typical day. And uh so there's certainly some demand out there. But you know, the the manufacturers really have uh have had a challenging path to navigate with so many options on the table. Extended range EVs, traditional battery electrics, hybrids. Um, you know, some of the bigger ones are trying to cover all the bases and produce in all of the different areas, but it's a challenging time to uh to navigate.

Jim Fitzpatrick:

Yeah, no question. And it looks like there's car companies out there that are going, well, maybe maybe we don't need a truck called the Lightning, and maybe that's that's something that's gonna go by the wayside. I mean, there's a lot of OEMs that are now looking at their EV lineup altogether and just saying, okay, enough, right?

Tom Kondrat:

Yeah, the you know what's interesting when you look at the data, we we see, and and not only uh uh broad-level data, we're talking about individual consumers. When we look at that data, we see the typical EV buyer as kind of a carbon footprint conscious consumer who prefers to drive smaller, mid-size type vehicles. So, you know, these uh these uh um vehicles that have come out, larger SUVs, larger pickups, have struggled to find footing, broad-based consumer demand in those segments. Whereas, you know, something like the Model Y, um, you know, the Ford Mustang Mach-E, right, those are more of the typical kind of EV buyers that buy mid-size and smaller vehicles, and and those vehicles have had more sales success.

Jim Fitzpatrick:

Yeah, for sure. Um, many that I've spoken to in the industry have pointed to Tesla, and they say that at the end of the day, Tesla is probably going to come out as the winner uh with all of the changes that we see in the tax structure, uh the tax incentives going away and such. Would you agree with that?

Tom Kondrat:

So they certainly have a head start. Um, you know, based on our data, um, Tesla had their record sales month in August.

Jim Fitzpatrick:

Okay.

Tom Kondrat:

And uh we you know, we we see September being pretty close to that at the moment. So um, you know, they've had a couple great months. And so uh they certainly have a head start. Um, but when you talk about you know regulatory changes, I think an underreported story generally is the impact of the CAFE rules related to kind of the the credit trade dynamic that happens kind of behind the scenes. Uh that you know, the average consumer doesn't see that so much, but but in order to meet those cafe standards, the manufacturers made very long-term investments and strategies in order to comply with that. And those rules also changed too this year with the big and beautiful bill.

Jim Fitzpatrick:

That's right. That's right. Yeah, there's no question. Um affordability is still a major factor out there among consumers, right? Average price of a new car being $50,000 or the transaction. Um where where are we on that? Is that made, I would imagine that's made much of an impact in all of this?

Tom Kondrat:

Yeah, we we've seen very strong demand, even though the average transaction price has increased. Yeah. Uh we've seen consumers moving up into larger segments, you know, gradually getting larger segments. Um, but one interesting note from October is that while the retail industry was down about six and a half percent overall, luxury sales declined 11%. Okay. So in those higher tiers, in those vehicles, we did see more of a pullback in October, okay, which could signal some weakness going forward uh in that segment. We'll see if that's sustained. But uh certainly luxury vehicles were were down a little more than the industry overall.

Jim Fitzpatrick:

That's because they're all waiting for the December to Remember sales event.

Tom Kondrat:

Um yes. What a great tagline. I I use that all the time myself. You know, that's it's a great, wait a minute.

Jim Fitzpatrick:

We're this close to December? Hold on a second. And of course, you know, Mercedes-Benz and all the others are you know, follow suit with different to you know, get as many deals as they can by the end of the year. But uh but that is interesting still that the the you know luxury sales are down.

Tom Kondrat:

Yeah, I mean, you know, you and I have been in the industry a long time, right? Uh the the December sales month month, 20, 30 years ago, was not the biggest selling month of the year.

Jim Fitzpatrick:

Yeah.

Tom Kondrat:

But it is now. I know. And it is in a in a major way. And we do see the luxury sales pick up, especially in December. So yeah, that'll be an interesting dynamic to watch. Um, you know, we'll will luxury get its momentum back. Uh typically sales are strong in December.

Jim Fitzpatrick:

Sure. Anything else uh jump out uh from October sales um that you thought was-

Tom Kondrat:

Well, you know uh, you know, there's the other news item other than EVs this year has been the the tariff debate.

Jim Fitzpatrick:

Now, tariffs, what are what are tariffs, Tom? I haven't really heard much about what is the tariffs you speak of. You do you mean the the the trillions of dollars that have been poured into the government?

Tom Kondrat:

Yes, yes. I'm looking forward to my tarrif check.

Jim Fitzpatrick:

Listen, regardless of what side of the aisle you're on, and this isn't political, it is entertaining to watch the president talk about tariffs and all that we're making. But anyway, go ahead.

Tom Kondrat:

No, it's it's been a very interesting news story, and and so much as you know, this has been a very interesting year, you know, for the auto industry. So many stories, so many ups and downs. Yeah uh but but despite all that, we're running up four percent year over year, right? So for all the doom and gloom, for all the anxiety, which which it for good reason, yeah, about what will happen with tariffs, the industry is up so far this year and uh looks to finish above last year when we when we get through December.

Jim Fitzpatrick:

That's great.

Tom Kondrat:

But uh, but on the tariff question in particular, um, one interesting dynamic that we've been watching is how many vehicles are sold in the US that were assembled in the U.S. And that number has been increasing ever since the announcements of the tariff uh policy has gone into effect. There you go. Um and in October, uh here's a here's an interesting data point for you. In October, um, U.S. assembled vehicles are 16% higher sales compared to October of 2024.

Jim Fitzpatrick:

Wow. Okay. That's pretty substantial.

Tom Kondrat:

It is a substantial number, and that number has been trending up for the last six months, and we continue to see it. Um so where where are those sales coming from? Well, uh European and Asian assembled vehicles are down 16% in October. And and so the other the the third the third set of countries there is Canada, Mexico. Uh sales from Canada-Mexico assembled vehicles in October are up a modest three percent.

Jim Fitzpatrick:

Okay. Okay. Interesting. Hmm. That's that's uh so do you think that that's driven what what's driving that? I could maybe a couple of factors. Maybe it's the consumer that's that's driving that, or is it the OEMs pushing those vehicles out? Maybe there's more incentives behind them. What what's your take on that?

Tom Kondrat:

Yeah, so my take on that is really all of the foreign investment that's been made in U.S. manufacturing in the auto industry over the last 20 to 30 years. Um, you know, everywhere from even in northern states like Ohio and Michigan, all the way down to Alabama, yeah, uh South Carolina, et cetera.

Jim Fitzpatrick:

The home state of Georgia, right here with CBT News.

Tom Kondrat:

Exactly, right? That's right. Uh so you you can go down the list, and all that manufacturing base has been invested there. And I think just very quietly, very subtly, um, the OEMs are shifting production, uh, making more of those US assembled vehicles. And whether that's through you know, pricing strategies, incentive, marketing, you know, all of those kinds of things, I think it's a little here, it's a little there. And when you add it all together, you're seeing something pretty significant happening in auto manufacturing in the U.S.

Jim Fitzpatrick:

What's your forecast for how we finished 2025?

Tom Kondrat:

So um we're forecasting the the fourth quarter to be down 5%. Now, while that may sound pessimistic, and I and I guess it is, the fourth quarter of last year was gangbusters. Okay. Uh the fourth quarter last year was about a 16.5 million SAAR.

Jim Fitzpatrick:

Okay.

Tom Kondrat:

So for us to be down about 5% from that would be in the upper 15 million. Um, you know, probably close to 16 million. So still very solid.

Jim Fitzpatrick:

Yeah.

Tom Kondrat:

But uh we're gonna see probably for November, for December, sales down slightly, but it'll be versus a very strong finish last year. So overall, we we think uh the industry will finish just slightly north of 16 million units in total for the whole year with a solid fourth quarter to end the year.

Jim Fitzpatrick:

As you know, we you know, we usually pull ahead a number of deals into December that are typically, you know, could have been in maybe even in January. January is kind of a tough month because of that. But uh what what what's your take on the first quarter? You think things are going to be still pretty brisk?

Tom Kondrat:

Well, um, you know, we we do think that uh uh the first quarter of next year will be um kind of uh business as usual. Right. Um one thing that we are watching for is whether or not there will be a rebound in battery electric sales. Okay. Um we just saw a ton of pull ahead into August and September. You know, we expect battery electric sales to be depressed here to finish the year. And but but then you'll have some consumers returning the market uh that weren't pulled ahead. And uh we we kind of see that battery electric bump happening more in into the spring when battery electric sales tend to be stronger than in the first quarter. But that will be a story to watch is whether or not you know that rebound will happen in January, February, or will it take to the spring thaw to kind of get battery electric sales uh churning again.

Jim Fitzpatrick:

Okay, okay, good. Now that I mean, really, you've got some you brought some good news with you today, you know. I mean, it it sales are continue to be strong, uh, with the exception of maybe luxury cars, but uh unfortunately they they were down a little bit. But uh but otherwise, no real shock, you know, not nothing's too too uh shocking, right?

Tom Kondrat:

Well, you know, that battery electric, you know, those sales declines were were pretty significant, right?

Jim Fitzpatrick:

But I mean kind of anticipated, right?

Tom Kondrat:

But it's it's something to anticipate. And I think, you know, um this is a long-term. This is a long-term developing story. It is uh, you know, whenever you've got sales spikes, you usually have some kind of uh secondary effect. And so that's what we're seeing. But yeah, I think uh the industry is strong, the state of the industry is strong and will continue to hum along, um, at least for the next few months.

Jim Fitzpatrick:

Yep, right. And every dealer I talk to says they're you know they can't get enough technicians, that they're uh fixed ops departments are you know doing gangbusters and of course used cars, which is a whole nother topic and another uh show that we could do, but used cars sales continue to be uh pretty strong. In fact, the the the challenge there is getting used cars, right? Getting enough cars for those used car departments. But um so so things are good. It's good, it's good to be a dealer these days. So Tom Kondrat, global lead for advanced analytics at urban science. Thank you so much for joining us on the show. Very much appreciate it. It's always great catching up with you and uh and and the team at Urban Science. So you always bring the goods. Thank you, thank you so much.

Tom Kondrat:

Thank you, Jim. Thank you.