Auto Industry Faces Supply, Competition, and Finance Pressures

Honda cut its full-year profit outlook after one-off EV costs and a component shortage tied to chips from Nexperia, which the Dutch government recently took control of; the company also flagged roughly $2.6 billion in U.S. tariff exposure, while shares slid as Chinese EV makers steadily erode its Southeast Asian market share.

U.S. consumer stress is showing in auto finance: the share of subprime borrowers 60+ days past due rose to 6.65% in October, the highest since 1994, as inflation and the return of student loan payments squeeze household budgets and strain lenders exposed to subprime loans.

Dealerships face a service-retention crisis as vehicles age. A recent industry study found dealerships handle 12% fewer visits than in 2018 and that only 54% of owners with newer cars returned for dealership service in 2025, down from 72% in 2023. With average vehicle age at 12.8 years and dealership service and parts revenue topping $156 billion in 2024, declining loyalty threatens long-term sales pipelines.

In retail moves, Lithia Motors acquired two Southern California luxury stores expected to add about $450 million in annual revenue, boosting its acquisition-driven revenue outlook.

Strategically, the U.S. remains heavily dependent on China for rare-earth materials crucial to EV motors and defense; building alternative mining and processing capacity will be a long, capital-intensive effort.