The Auto Market Brief

How much is fuel economy shaping today's automotive market? More than ever. From wholesale values and consumer demand to product planning, fleet investments, and federal regulations, efficiency is becoming a defining force across the industry.

In this episode of The Auto Market Brief, host Erin Keating is joined by Cox Automotive Chief Economist Jeremy Robb to explore the latest economic and automotive market developments. They discuss stronger-than-expected GDP revisions, rising interest rates, evolving consumer behavior, and what new market data reveals about the growing impact of fuel economy on vehicle values.

A Stronger Economy, Higher Rates
Jeremy breaks down the latest GDP revisions, which point to a more resilient U.S. economy than many expected. The conversation also examines rising bond yields, increasing auto loan rates, and how financing costs continue to influence vehicle affordability and purchase decisions.

Fuel Economy's Growing Influence on Vehicle Values
New analysis from Cox Automotive's Manheim Market Insights team reveals a clear relationship between fuel economy and depreciation. As fuel efficiency increases, vehicles are retaining value more effectively, with some of the highest-MPG segments showing appreciation. The discussion also highlights continued strength in used EV values despite increasing off-lease supply and ongoing inventory growth.

From Regulations to Product Strategy
Erin reviews NHTSA's finalized CAFE standards, developments in commercial fleet electrification and autonomous trucking, and the growing role efficiency plays in automaker decision-making. The episode concludes with insights from Hyundai's redesigned 2027 Tucson launch, including the company's expanding hybrid strategy and investment in U.S. production capacity.

The episode also covers compact vehicle performance, consumer adaptation in an affordability-constrained market, Tesla Semi fleet adoption, FedEx's commercial EV investment, battery-retrofit solutions for trucking fleets, and Hyundai Motor Group's competitive momentum.

The Auto Market Brief delivers timely data, clear context, and practical insight to help industry leaders make smarter decisions—what's happening now, and what's coming next. 

The Auto Market Brief is powered by Cox Automotive. For more industry insights and expert perspectives, visit our Insights Hub at Cox Automotive Insights.

Creators and Guests

Host
Erin Keating
Erin Keating is an Executive Analyst and Senior Director of Economic and Industry Insights at Cox Automotive. She brings 30 years of professional experience, including 14 years in the automotive industry, providing analysis on market conditions, automaker performance, and consumer demand shaping the economics of the new-vehicle market. Erin spent 10 years with Audi of America, including leading Audi Motorsport North America, informing her perspective on both commercial strategy and competitive dynamics.
Guest
Jeremy Robb
As chief economist at Cox Automotive, Jeremy Robb oversees the enterprise-level economic outlook, monthly forecasts, client advisory, media briefings and the strategic integration of data from the company’s extensive retail and wholesale platforms. Jeremy leads Cox Automotive's Economic and Industry Insights team, working directly with clients and executive leaders in sales, strategy and finance. He draws on his background helping companies consume data and insights to make better business decisions. He has been focused on finance and strategy for large corporations in the financial services and automotive industry for the past 20 years. Jeremy joined Cox Automotive in 2018 after spending 6 years at Nissan where he led functions in finance and remarketing.

What is The Auto Market Brief?

The Auto Market Brief, powered by Cox Automotive, breaks down the latest trends and forecasts shaping the automotive industry. The show is hosted by Cox Automotive Executive Analyst Erin Keating, coupling years of experience translating data and trends with the data and industry insights of the largest automotive services and technology provider.

Joined by other Cox Automotive experts and outside guests, you’ll get data-driven insights and industry outlooks from some of the industry’s leading voices.​

Erin Keating:

Welcome to the Auto Market Brief from Cox Automotive. Each episode, our experts and special guests break down the latest trends, insights, and news shaping the automotive market. We'll give you the information that truly matters so you can make smarter decisions and drive your business forward. Hello. Welcome back to The Auto Market Brief.

Erin Keating:

I am Erin Keating, your host and industry executive analyst here at Cox Automotive. And as usual, I've got our chief economist, Jeremy Robb, alongside me today. Hello, Jeremy.

Jeremy Robb:

Good morning. Hope you're doing well.

Erin Keating:

Thank you. Doing okay. Doing okay. Hanging in there. Yeah.

Erin Keating:

I know that we've got a lot to cover today. Couple different things that have come up in the economy. One, I think you're gonna talk to us a little bit about the final GDP numbers. Interest rates, loan rates, that's, of course, the topic the day. You know?

Erin Keating:

Hopefully, we won't spend too much time talking about bond yields because I feel like every other person in the world is covering that, but I know that it matters. And then we did just have our third quarter movie call this week, and some really interesting things came out of there. So would love to hear your opinion on that. Yeah. For me, I'm just gonna talk a little bit about some regulation that came up with the final ruling on the CAFE standards, some updates on commercial fleet advancements.

Erin Keating:

Quite a few headlines in the last couple of weeks around commercial fleets and some decisions they're making around electrification and autonomy. And then, of course, we started the battle between the Ford and Hyundai sales results. So I figured I had to follow-up on that and also just speak a little bit about Hyundai because they did have a major launch last week that I was lucky enough to attend. So with that, Jeremy, let's kick it off. What is happening in our crazy world of economics?

Jeremy Robb:

Well, a lot. Last week, two weeks ago, we didn't get hardly any economic data. And then last week, it was like they brought the dump truck and gave it all to us. And not only did they give updates to a lot of things, they did a lot of revisions going back for the last four or five years. And so it changed a lot of the data historically as well.

Jeremy Robb:

And I'm not going to go through all of it because we don't have all that time to do it. But one of the things that I think was front and center was the GDP report. So the final number for Q2 was out and it was revised up to 2.2%, the growth rate from 1.5% and showed a lot more strength in the consumer spending sector. And Q1 was also revised up as well. Yeah, that one went from 2.1% to 2.5%.

Jeremy Robb:

So, the first half of the year, when it's all said and done, has ended up being quite a bit stronger than a lot of people thought it was. I'm revised up, consumer spending was revised up, AI investment and still driving a lot of growth there too. Then there's this other mouthful metric that is new on the scene that the Fed has been talking about called real final sales to private domestic purchasers. It's very related to GDP, but they take out some of the things that are a little bit more noisy like government spending, inventory changes, and net exports. If you look at that one, that one is going up and the annualized rate of 4.6%.

Jeremy Robb:

So, double the rate of GDP growth. That was the strongest reading in that metric since I think Q1 of twenty twenty three. So, what does that mean? Why are we talking about it? One of the reasons the bond market is going up and all is like there's concern about inflation, but there's also some thoughts that the economy and overall is maybe a bit stronger than we thought it was.

Jeremy Robb:

And those readings tell you that if you talk to anybody on the street, and you told them the economy is really strong and is stronger than you think it is, they probably want to slap you.

Erin Keating:

Right. Exactly.

Jeremy Robb:

Because you you and I both talk to people all the time and if you say so, people are like, what are you talking about?

Erin Keating:

Right.

Jeremy Robb:

But there's a lot of strength in areas of the economy and that's coming through. Rufism budding as they say, right? Yeah, totally. It's a really interesting time to watch all that. That has resulted even though you don't want to talk about it and bond yields They've stayed high this week also, the ten years, I think close to 5.3% overall.

Jeremy Robb:

We don't have to talk about bond yields because we're not bond traders or anything like that. But we do have to talk about them because they are directly related to automotive loans and a lot of people borrow money to Now, purchase a I did a little digging this week in some of our data and I've seen that more people go into cash more recently to purchase a car versus taking out a loan because of the rise of interest rates overall. And interest rates have been going up for most of the year, but they really got on this big kick starting in like August and September and now we're mid October almost and seeing that too. But we didn't see that translate into loan for consumers, for auto loans. We didn't see a lot of growth in the interest rates of that.

Jeremy Robb:

Pretty flat in August, started to rise a little bit in September. But now, in the early part of this month, we're seeing a bit more of an acceleration in the price being passed along to consumers out there. So, that could have a little bit more of an impact on maybe sales, you know, as we as we move through with that coming in because a lot of people finance cars, you know, even if you're a few

Erin Keating:

of Right? And we know that shopping by payment, I mean, that's... We've been talking about it for a while, right? The vehicle price isn't necessarily the enemy. That's been it's been slowly rising.

Erin Keating:

It is high, but it's it's not been keeping up with inflation necessarily, but the interest rates are... Yeah. But it really kills that monthly payment. Right?

Jeremy Robb:

Yeah. If you if you look back, we do a lot of comparing to 2019 because it's prior to the pandemic. Right? New car prices are up a lot since 2019. But the average vehicle payment is around $800 now.

Jeremy Robb:

That's up substantially since 2019. The price of the vehicle rising is a big component of driving the price higher. But the financing cost from low financing rates back in where we were until like the Fed started raising rates in 2022, those have risen so much from then that the increased financing cost is having a really big impact on the payment being a lot higher. So, if an interest rate goes, we've talked about it a lot, a point higher now to consumers, it doesn't make that much of a difference. But relative to where we were five years ago

Erin Keating:

Sure.

Jeremy Robb:

It's made a substantial difference in the cost of the payment.

Erin Keating:

Exactly. Yeah. And we have to remember that's the time period that people shop for cars. Right? They aren't doing it every day.

Erin Keating:

They're doing it every three, five, seven years. And so it becomes a pretty big pill to swallow when you see that number show up very differently in the second second time you get whack. Yeah.

Jeremy Robb:

Yeah. So really important to think about. But we'll see how that factors out. That's why they say the Fed operates on a lag. Interest rates operate on a lag same way too because just like you said, not everybody's shopping for a car every month or every year.

Jeremy Robb:

And so to see high rates slow things down, it takes time for that to work.

Erin Keating:

Gotcha. Well, and of course, things that factor into what lenders are willing to do is over on the other side of the house, the wholesale and depreciation rates and retention values and things like this. I was just curious, what do you... We we just released the movie webinar this week.

Jeremy Robb:

That's right.

Erin Keating:

What's interesting? What's shaking?

Jeremy Robb:

Yeah. The movie webinar, we did it differently for the first time ever. We recorded it and didn't do a live session. That allows us to actually do more. So we have more people involved.

Jeremy Robb:

We can dig in a little bit deeper. It built out a lot of media, curious about what's going on from it, which is great. And we're in a really interesting time of the year. The end of Q3, start of Q4, you can typically see the highest depreciation rates of the year on vehicle values overall, especially that how we measure them at Manheim. And we saw that September was a pretty rough month.

Jeremy Robb:

And really the quarter was pretty rough. But it was a little bit of a correction from we had been doing better earlier in the year across the board. And prices like started to come down and the Manheim index or the movie as we call it, it's now down 0.6% year over year. A lot of that was driven by performance in September. But there are a lot of really interesting things that are happening right now if you kind of dive into the details.

Jeremy Robb:

So one thing that we have been tracking and the tools that we have to do this now are better equip us to look at more details than we've been able to before. But we are seeing the impact of gas, high gas prices. Over time, you can see it in the Manheim index and the data like high gas can hurt big trucks and SUVs. That's been clearly happening really in August and September timeframes. And even high prices of diesel impacting the values of diesel vehicles quite a bit.

Jeremy Robb:

It's a small percentage of the total. So it doesn't matter quite as much in terms of its weighting. But those vehicles, big trucks and SUVs, and especially large diesel vehicles are high priced vehicles in the Manheim data. When they start to decline more than they have and more than the rest of the pool, because they are higher priced, they have a bigger drag on the index and on our average values that we share. And that was something we've been monitoring, we talked about it.

Jeremy Robb:

And then we have so many like great people that we work with that are good with data. About two weeks ago, I was like, man, it would be really cool to be able to see depreciation rates by fuel economy. And Jonathan was like, yeah, hold my beer, we'll go get that. And two days later came back and was like, here we go. Yep.

Jeremy Robb:

I wanted to bring him on today to talk about this, but he was tied up. We'll have to do that soon. But if anybody's listening to this and we don't share slides here, I would encourage you to go look at it. I think it's in the second section of our movie webinar, but it's a really telling chart. It just shows you that basically vehicles that have low fuel economy have been depreciating quite handily this year.

Jeremy Robb:

It literally just moves from the lower left to the upper right. As fuel economy gets higher, you see less depreciation. When you start to get over 35 miles per the gallon, we actually see appreciation in vehicles. That's outside of EVs, doesn't count EVs.

Erin Keating:

That's what I thought was so striking. It was that it's it's not even taking EVs. If... And alone, right, in the movie, we've seen EVs hold value. Even with increasing inventory coming into play, EVs are continuing to be strong.

Erin Keating:

But when you take those out, that's what I thought was really striking about what Jonathan was able to pull forward was just truly by bucket of miles per gallon. You know? You Yeah. You get worse and worse. Fuel efficiency you have, the the worse the picture looks for depreciation, but then, you know, the higher you go, just really amazing and it and it doesn't even include zero gas vehicles.

Jeremy Robb:

No. I know. It's a... That to me, that is like one of the most fun parts about working here in having these roles is that we have so much data and we can basically hear what people are talking about. A lot of the times we can go connect the dots enough to show it and it shows you exactly what you would think.

Jeremy Robb:

Right. But we had never seen it before. Yeah. So, I think it's the bee's knees in terms of something cool and really relevant to what is happening right now. Then just to end on your point, EVs are still rocking and rolling, even with all that supply coming back.

Jeremy Robb:

Even if you isolate it to just a three year old EV right now, I think it's still up almost 7% or seven percentage points from where it started this year. Sure. And as we got more supply in the first half of this year off lease EVs, we're getting even more in the second half. But we're already into the second half. Right.

Jeremy Robb:

Right. It's still every week you monitor this. I think that is the longevity curve of fuel prices staying high. As they do it over time, you get a lot more consumers willing to think about adopting an EV. I had a thirty minute call with a reporter yesterday and that's all we talked about.

Jeremy Robb:

You know, so do you know, like it's everything we've talked about and as as much as the EV market was kind of poo pooed on, right, over the past like couple of years, it's really interesting to see some of these dynamics happening, on the used car side, even though it's it's still a small part of the market.

Erin Keating:

And it will continue. Yeah. Still a small part of the market, but it will still happen. And and I thought the other little tidbit that I caught in the movie call was compact sedans. Yeah.

Erin Keating:

Hail to the compact sedans. And you see it in the new vehicle market as much, you know, those those companies, as I will talk about in just a minute, that have those vehicles. They're doing well. Those vehicles are selling well and new, and they are holding on by the hair of their chinny chin chin in in wholesale as well. So people are, you know...

Erin Keating:

And it goes back to our third quarter call, right? The point that I was trying to make, behavior adaptation. People will adjust their behavior before they will exit the market. We should not be so afraid of all the numbers that we do talk because, as you pointed out, the economy is quite resilient anyway. Yep.

Erin Keating:

And and b, people need four wheels and a... And an engine in this country to get around, and they will adapt before they will just exit the market.

Jeremy Robb:

And those small compact cars are lower priced vehicles. Yep. And so all the data that we share that says lower priced vehicles are holding their value better Yep. That is exactly one of the things. And to every point you just made, consumers need options.

Jeremy Robb:

They need affordability. And that is actually being seen in the data this year.

Erin Keating:

Yeah. Well, I appreciate all of that, Jeremy. I mean, I feel like a couple times in the last few times, we've we've felt like we were like Debbie Downers, but I feel like today was a little bit more of an upper. I mean, I I don't know. I'm feeling a little bit more positive.

Jeremy Robb:

Yeah. There you go. Yeah. Yeah. It's it's October.

Jeremy Robb:

It's the fall. You know?

Erin Keating:

Just taking people on our on our mood roller coaster. You know? I mean, it just changes depending on what's happening, but that's the exciting thing. As you say, that's like what makes our job fun is that we get to Come along for the ride

Jeremy Robb:

with us.

Erin Keating:

Cycles. Exactly right. Yeah. Exactly right. Well, thanks for being here today and for updating us on that.

Erin Keating:

And I look forward to catching up in two weeks to see just where we are on the roller coaster then.

Jeremy Robb:

Sounds good. Great to be here.

Erin Keating:

Okay. So now time for industry news. You know, there's no single road to the industry's next chapter. A couple of things that I'm gonna review. Washington, it continues to change the rules.

Erin Keating:

We know that's gonna happen. Fleets, commercial fleets are testing what actually pays, and Hyundai is leaning into hybrids and local production. So different approaches, same question. What's gonna work for the customer and the business? Right?

Erin Keating:

Well, to start out, let's talk about NHTSA's final CAFE rule. The new rule that came out lowers the model year 2031 industry wide fuel economy requirement from roughly 49 miles per gallon to 34, 35 miles per gallon. It excludes EVs and plug in electric operation when setting stringency. It's phasing out the inner manufacturer credit trading beginning with model year '28 credits, and it's broadening what qualifies as a light truck. And these two things, the last two things, I think, are the biggest of consequence.

Erin Keating:

Right? The manufacturer trading credits, we know, was really helping organizations like Tesla and even Rivian. So that's interesting that that's going away in model year '28 because that was a significant revenue point for both of them. And then broadening what qualifies as a light truck, that's interesting because that allows more SUVs and crossovers into that less stringent truck category, easing compliance for automakers whose profits really depend on those larger vehicles and giving them more flexibility across, you know, an internal combustion engine, a hybrid engine, plug in hybrid, and electric vehicle plans in the future. So really interesting here.

Erin Keating:

And it's funny, we always sort of revert back to... Think it was a couple episodes ago that we talked with Sean Tucker. And these CAFE standards that came into place, you know, this was actually the rise of the SUV was because of some of the classifications around light trucks. So interesting to see that get reversed. On to commercial fleets because a lot's really happening here in electrification and autonomy.

Erin Keating:

Heavy duty fleet electrification is getting a significant commercial test right now. A coalition of major shippers organized through ZScale has ordered 2,500 electric class eight trucks with Tesla Semis as the primary choice. The alliance ultimately aims to deploy more than 10,000 electric trucks. So Tesla's Semi is actually finally getting its big debut here. Another case in point, FedEx has placed about a 300,000,000 order for 2,000 electric trucks from the startup Harbinger, one of the largest commercial EV purchases announced this year.

Erin Keating:

The deal signals that electrification really remains an attractive option in duty cycles where vehicles return to a central depot and operating costs can be closely managed. You know, we've known that electrification is gonna be difficult in the class eight trucks and even class, you know, four through eight because of the long distance that's required for those trucks. But when we know that those things have a place to come back to a central depot and to recharge easily, this is now seeming like a plausible solution for commercial fleets. And so even though consumer EV adoption continues to face a lot of hurdles, commercial fleets seemingly are willing to move forward and see if they can't prove out the economics of electrification, which is interesting. And then, of course, we...

Erin Keating:

Over on the autonomous side, we have Kodiak Robotics, who just announced that IKEA will launch a driverless freight operation in 2026, marking another significant commercial deployment of autonomous trucking. Remember our episode when we spoke with Alex Fraser and Zoe on our team about what could happen if we start turning to more autonomous vehicles in the future. So the program will use Kodiak self driving technology to move freight for IKEA, extending a trend in which autonomous trucks are gaining traction on predictable, repeatable, logistic routes. This is really helpful for them to be reducing costs when if they can't find the talent, you know, truckers and drivers to be able to drive the materials, but also is a place where it can potentially broaden out consumer facing applications. And unlike rover taxis, trucking continues to offer a clearer path to commercialization, where labor shortages, again, as I mentioned, and rising transport costs and really tightly defined routes can create a much more compelling business case for automation.

Erin Keating:

So we're going to keep a close eye on that. Trucking fleets, you know, are finding a cheaper path to electrification also by converting existing diesel tractors to operate with swappable battery packs rather than purchasing entirely new electric trucks. You know, we've seen a lot of boutique businesses that were looking to potentially offer individuals with internal combustion engine vehicles, private vehicles, be able to convert those into electric vehicles. It's very expensive. It's, again, it's a pretty niche business.

Erin Keating:

But seeing this now happening in the trucking fleets is really interesting. It's just a pragmatic reminder that the the transition to electrification may not be a real clean replacement cycle, but in many commercial applications, retrofitting existing assets could prove more economical than buying brand new vehicles, and we may see this trend continue. So again, a lot of really interesting things to watch in the commercial fleet space that may eventually translate into what we see on the light vehicle side. But we'll be paying close attention to it from a Cox Automotive perspective for sure, given our fleet business. And then finally, you know, I have to just raise our hands and admit that in our third quarter forecast call, our forecaster, inevitable, Charlie Chesbrough, did mention that a couple of brands might be in a position to potentially take over other brands.

Erin Keating:

So namely one was that Toyota might outsell General Motors this year, and that would, I think, be the second time, that it might be able to do that. But, more prominent was the announcement that Hyundai Motor Group might outsell Ford. And we've certainly dealt with a lot of questions about that. And, yes, in fairness, we should, say the Hyundai Motor Group does include Hyundai, Kia, and Genesis. But when we talk about Ford, we also mean Ford and Lincoln.

Erin Keating:

Anyway, Ford did, in fact, continue their sales leadership over Hyundai in the third quarter, but we are going to continue to keep our eye on it. And I actually had the honor of attending a global launch for the redesigned 2027 Hyundai Tucson. And I have to say there were smiles all around for Jose Munoz and his lieutenants. I mean, the vehicle looks great. It got boxier.

Erin Keating:

It's more SUV like, simplified powertrain lineup, and a stronger hybrid focus. And I think that this is one of the things that Hyundai continues to bring to the fore. Last week, we also saw the Automotive News Congress, which had most of the executives on stage, not only from Hyundai, but we heard from Jim Farley. And one thing that we at KAAS Automotive continue to say is that the brands that have the vehicles across every segment, including this compact crossover segment, which is really important to the market, that's where the Tucson sits, and continue to bring good powertrain alternatives. So this new hybrid really will continue to lead in the market, and that is why we see that Hyundai and Kia and Toyota and Honda again, being really successful in this market.

Erin Keating:

Individuals are price sensitive, but they will adapt before they leave the market. And when you have the right powertrains and you have the right vehicles in the right segments, this is gonna be what carries the day in our opinion. It was interesting that in in that same week when we heard about the Tucson in Detroit, Jose Munoz, also at the Automotive News Congress, did announce a roughly $500,000,000 investment in its Alabama operations to localize production of this Tucson hybrid and to support future Santa Fe hybrid models. So I think it goes to just point out that, you know, manufacturers continue to find that investing in America, building here for here is really important. And again, those that are looking to make sure that they can satisfy the market in all those segments and have powerful differences in powertrain are really mattering.

Erin Keating:

And again, you heard it earlier in the episode, Jeremy even talking about the fact that this is showing up on the wholesale side. Vehicles with more fuel efficient engines are actually doing better when it comes to depreciation. So we continue to look for the stories that matter to you most, the headlines and the economics around our industry and for our consumers. We appreciate you being with us today. That's it for this episode.

Erin Keating:

You can find more of our insights at coxautoinc.com. And if the conversation was useful, please like the episode, subscribe to The Auto Market Brief, share it with someone who follows the market as closely as we do. We'll be back soon with the economic high notes and industry headlines that matter for you. Thanks for tuning in. Thanks for joining us on this episode of The Auto Market Brief.

Erin Keating:

To stay up to date with all the latest news and perspectives from our team of experts, be sure to visit our insights hub at coxautoinc.com.