Auto & fleet industry: What to expect through 2025

The auto sector and fleet world are undergoing significant changes, but we may see a return to a new normal this year. What trends and updates are we seeing—and can we expect to see—in 2025? We talked to our fleet experts, Lars Nielsen, Regional Vice President of Fleet Sales, and Jason Kraus, Vice President of Operations, to find out.

What are the fleet industry’s “action items” this year?

Fleet managers must be prepared for anything and everything in 2025.

“If the 2025 fleet industry was distilled to one word, it would be ’pivot’,” says Kraus. “Everyone has to be ready to pivot, whether it’s dealing with increased supply and continued demand, decreasing inflation rate and increasing interest rates, or the Trump administration changing direction from the Biden administration.”

The market may never return to pre-pandemic times—fleet managers have to contend with longer order-to-delivery (OTD) times, higher interest rates, reduced incentives, and lower production model allocations. Even the job of fleet manager has changed, with many fleet managers having to lead the fleet alongside other job responsibilities.

Here are a few of the big changes coming in 2025:

Supply chain issues—are we back to pre-pandemic conditions?

*updated 2/3/25

Since COVID-19, shortages of vehicles, parts, and aftermarket equipment have left many fleet managers scrambling to source (and upfit) new vehicles, repair existing ones, and keep fleets operating efficiently. Some positive signs are pointing towards a return to pre-2020 availability conditions:

• Production levels continue to improve. According to Cox Automotive, incentive spending in July was 60% higher than a year ago on passenger cars and pickups. Meanwhile, Work Truck Solutions reports that new box and service trucks are back to or doing better at average days-to-turn (DTT) than before the pandemic.
• Cargo vans are no longer out of stock everywhere, though DTT hasn’t entirely returned to the levels it was at in 2019.
• Light-duty vehicle prices have been on a downward trend due to discounted EVs, but prices for commercial vehicles are expected to remain high. Even with supply climbing, prices still haven’t yet returned to pre-pandemic levels.
• Compact vans still lack a direct replacement, with most fleets opting for compact or mid-sized pick-up trucks with a cap and pull-out drawers or compact or mid-sized SUVs with a partition and shelving. Many fleets prefer one of these alternatives versus upgrading to a full-sized cargo van since the initial cost and fuel economy are still too high.
• While EV production slots are widely available, hybrid production slots are still tight depending on the make and model.
• MY2024 achieved an 18-week OTD, down 23% from MY2023. Kraus mentions that MY2025 should see a further reduction, even down to a 15-week OTD—but it’s still higher than the 12-week OTC average in 2015-2019.
• In terms of non-vehicle shortages:
• There continues to be a shortage of new technicians and mechanics. With the retirement of baby boomers, the popularity of other job types, and historically low unemployment, the field is expected to continue languishing. This has also led to an increase in maintenance and labor costs.
• Parts and components have mostly returned to pre-COVID levels, although different issues have caused new shortages.
• The war between Ukraine and Russia will continue to put pressure on minerals like nickel, palladium, scandium, and titanium.
• Conflicts between the United States and China may affect our supply of aluminum, nickel, cobalt, titanium, and other minerals. China also supplies 50% of steel globally.
• New aluminum and steel tariffs–restoring the tariff to a full 25% for both minerals and removing exemptions from all countries–are expected to be reinstated in March 2025.
• Upfitting parts and service bodies are readily available, but with the new tariffs, prices are expected to rise in 2025.

For more information on model year 2025 forecasts and the current state of production, hear from Kraus in these Fleet Studies Lab articles:

• Electric Vehicles: What to Expect in the Auto & Fleet Industry for MY2025
• Fleet Vehicles: What to Expect in the Auto & Fleet Industry for MY2025
• Medium & Heavy-Duty Commercial Vehicles: What to Expect in the Auto & Fleet Industry for MY2025

Operating costs and tax credits are still in flux.

*updated 2/3/25

The economy has been topsy-turvy the last four years, but it seems as though things will begin to even out. The slight decrease in unemployment, decreased inflation and rising GDP, suggest that the economy is starting to reach a new high. With inflation on its way to the 2 percent mark that the government is looking for, the Fed made another rate cut in December, dropping the federal funds rate from 5.25-5.50% in September to 4.50-4.25%.

Even with the changing of the economy, Kraus warns that interest rates are not returning to historical levels despite rate cuts, pointing out that “Inflationary pressures were anticipated no matter what, as both presidential candidates were proposing to spend more than incoming revenue and taxes.”

Fleet owners should also continue to expect increased operating costs, especially for maintenance, insurance, and fuel. Fuel is slightly down, but geopolitical challenges may cause that number to shoot back up again.

There is some expected relief on the way, though, in terms of used vehicle prices. These are expected to even out due to a lack of lease maturities. With fewer vehicles on the lot, dealers will look to the market for replacement units. Cox Automotive Chief Economist Jonathan Smoke explains the reasoning: “My hypothesis is that as franchise dealers come up short on what they are used to seeing returned to them monthly, they are going to the market to find units to replace. It’s incremental, but it’s enough to cause the days’ supply at wholesale to tighten, and we’re seeing retail used supply tighten too.”

While the Inflation Reduction Act of 2022 (IRA) extended the EV tax credit through 2032, the IRA is in danger of repeal. President Trump has stated his intentions in repealing the electric tax credit alongside other parts of the Act, promising to do so “day 1.” Experts state these provisions are “likely to be rolled back," but no one knows for certain when it will happen. Currently, IRA disbursement is under pause.

In the unlikely chance the IRA returns, new restrictions will continue to affect the tax credit. As of January 1, 2024, fewer EVs qualify for the total price. To receive the full $7,500, EVs must follow these rules:

• The vehicle must be purchased new.
• Assembly must be in North America, including the battery.
• Be under a specific price point—for cars, it’s less than $55,000, and for SUVs and trucks, it’s less than $80,000.
• A certain percentage of battery materials must not be mined or processed from countries hostile to the United States, such as China, Russia, North Korea, and Iran.

Vehicles purchased brand new after April 2023 that adhere to the price and one of the two other requirements will only be eligible for half of the tax credit, or $3,750.

In response, some manufacturers have lowered prices to maximize the opportunity for consumers, while others have increased prices on EVs that don’t qualify. Fleet owners should remember that “decreases in vehicle pricing often hurt residual values,” says Kraus.

EVs—here to stay or slowing to a crawl?

*updated 2/3/25

While state and federal governments are still interested in making dedicated efforts for full zero-emission fleets, carmakers and companies are stepping back from current EV plans. The main reason for this is declining gas and diesel prices—EVs were more appealing when gas was $5 a gallon, but now that it's back down to $3, it doesn’t seem “worth it” for the average consumer to purchase an EV. The lack of infrastructure and slow market movement is also stunting the electrification industry as a whole. For many, sustainability is now seen as a “nice to have,” even with increased weather events like hurricanes, flooding, and tornadoes.

At the same time, though, EVs had their best-selling year ever in 2024, with a record 1.3 million units sold in the United States. Cox Automotive’s most recent report found that EV sales are continuing to grow in the United States, Europe, and China, helped by discounts and price drops on new and used EVs and incentives from both OEMs and the government.

So, what does that mean for fleets? Kraus urges fleet managers to recognize whether a shift to EVs suits their company.

“Just as your investment advisor would recommend having a balanced portfolio, I’d suggest you consider this approach to your fleet operations,” he says. “There is a lot of talk about EVs, but it’s more important to recognize the different types of powertrains and consider what may or may not be an appropriate addition to your fleet.”

Kraus also adds that in 2025, the outlook for EV market stabilization depends on the innovations that the OEMs come up with next. “If one vehicle segment is the most likely to increase, it’s cargo vans,” he says. “Their application is best aligned with what’s available now—better range and better payload.”

One of the next big changes? Battery technology. Most OEMs are beginning to shift to 800-volt architecture, which allows for faster charging. Kraus believes the next big milestone will be solid-state batteries, smaller and lighter batteries that help vehicles attain twice as much range. He notes, though, that when solid-state batteries hit the market, they’ll be found in premium or performance vehicles before shifting to more commercially available ones.

As the push toward electrification continues, there’s another interesting opportunity to keep an eye on: the data that can be harvested from charging stations. “We already have telematics partners and charging infrastructure partners that can pull some really interesting data from EV charging stations,” Nielsen says—including things like duration of charge, miles and kWh added during a session, and amount of CO2 avoided. That data can be used to make critical business decisions that improve efficiency, productivity, and decarbonization efforts.

Regulations set to change

*updated 2/3/25

With a new political administration comes new regulations and laws, and changes may happen as soon as Donald Trump takes over the executive office.

One of the largest changes expected to occur is around the new Phase 3 greenhouse gas pollution standards created by the EPA. These standards require truck manufacturers to begin emission reduction by choosing a clean alternative (EV, biofuel, and hydrogen). This phase-in will begin with 2027 model-year vehicles, with the hope that by 2032, all new trucks will have reduced emissions by 60%. Truck experts expect massive pre-buys to happen this year, next year, and the first quarter of 2027, meaning that vehicles purchased now will not be as expensive as those after January 1, 2027, but will be at a premium based on increased demand. However, it’s just as likely these new regulations will be revoked or significantly altered, pushing off clean truck requirements even further than 2032.

Other regulations and standards that may be changed or even discontinued include the CHIPS and Science Act, increased Corporate Average Fuel Economy (CAFE) standards, an Automatic Emergency Braking (AEB) mandate in 2029, and even more.

“Each of these individually and all collectively impact the daily efforts and strategic plans of fleet managers,” says Kraus.

Rise of embedded telematics and AI.

*updated 2/3/25

Everyone in fleet management knows that telematics are critical for making data-driven decisions. OEMs have firmly implemented themselves in the trend, with nearly all of them offering embedded telematics and subscription platforms to broadcast vehicle data directly to fleet managers.

For fleet managers, that means more data to collect and analyze for the improved operation of their business—and “it can lower the cost of your telematics program since you won’t have to purchase plug-and-play devices,” notes Nielsen.

However, Kraus warns that open-source data isn’t something OEMs offer quite yet. “Keep in mind that OEMs do not share all of their data open-source with telematics service providers and data aggregators, which is a challenge when fleets typically operate a mix of OEMs and need a common platform to manage daily operations.”

AI and Advanced Driver Assistance Systems (ADAS) are other pieces of technology that the fleet industry expects to become more prominent in 2025. As safety technology improves, Kraus says fleet managers are excited by Level II ADAS becoming the industry standard—but are less excited by Level III or Level IV ADAS. The reason? More advanced ADAS can make drivers more lax on safety, and the technology has had its fair share of poor coverage. AI can help create teachable moments when ADAS activates, such as through camera recordings, but fleet managers must continue to make safety a priority and keep drivers up to date on what to know.

Regarding the auto and fleet industries, “the only constant is change”—so we can expect the landscape to shift even more in the months and years ahead. Want to stay ahead of the curve? Stay up-to-date on fleet resources and news by following Mike Albert on LinkedIn.