In a recent note to investors, Bernstein issued a warning about the U.S. auto industry, advising caution despite strong second-quarter results. The firm highlighted that the apparent Q2 strength is misleading and predicts a slowdown emerging in the latter half of 2025 and extending into 2026.
Bernstein characterized the robust Q2 performance as a “mirage,” largely fueled by demand pulled forward ahead of tariff changes rather than genuine market expansion.
“Tariff-driven demand pull-forward has flattered U.S. auto sales and earnings,” Bernstein analysts explained, pointing out that vehicle sales volumes increased by 9.4% in March and 10.4% in April on a year-over-year basis.
While pricing has held steady and discounting has been relatively mild, helping automakers maintain net pricing power, Bernstein cautioned that, “This is temporary, not a structural recovery.”
The rush by consumers to make purchases before tariffs took effect has led to a softer outlook moving forward. The firm warned, “Pull-forward leaves a vacuum in H2: expect a 3–4% SAAR hit,” estimating that roughly 300,000 units were advanced into the early part of 2025, potentially causing a gap in demand during the second half of the year.
Reflecting this cautious outlook, production cuts are already underway. According to Bernstein, “OEMs cut production plans by -6.7% from Q2/25–Q4/26,” with the steepest reductions expected in the third and fourth quarters of 2025.
Battery electric vehicles appear to be the most affected segment, with average production plans declining 17.5% per quarter. However, the overall volume decreases are primarily driven by reductions in internal combustion engine vehicle output.
Bernstein sees additional downside risk ahead: “The downgrade cycle isn’t over, estimates for H2 and 2026 still too high.”
Investor enthusiasm is likely to wane as summer sales data reveals slower demand and increased discounting. “Valuations have rebounded on the hope of tariff relief and haven’t priced in the tougher outlook,” the analysts concluded.