New Car Supply Plummets, Risking a “Manufactured” Supply Crunch

In a stunning development, the supply of new vehicles in the U.S. plummeted in July, according to the latest industry data. Both the total number of new cars on dealer lots and the days’ supply saw significant decreases, signaling that intense consumer demand is rapidly outstripping production.

This sharp tightening of the new car market is creating a dangerous echo of the post-pandemic supply crunch. Meanwhile, the most affordable used cars are becoming nearly impossible to find, with the supply of vehicles under $15,000 dwindling to a critical 31-day supply.

Let’s dive into the hard numbers.

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End of July 2025: Vehicle Inventory At a Glance

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Metric	Current (End of July)	vs. Previous Month	Analyst Outlook
New Vehicle Days’ Supply	73 Days	▼ 7 Days	Sharp Reversal
Total New Vehicle Inventory	2.68 Million	▼ 150,000 Units	Sharply Declining
Used Vehicle Days’ Supply	43 Days	▼ 4 Days	Tightening
Used <$15k Days’ Supply	31 Days	▼ 1 Day	Critical Shortage

Source: Cox Automotive & vAuto Live Market View Data, End of July 2025.

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Analysis: A Market on the Brink of a Supply Crisis

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The New Vehicle Story:

A Sharp Reversal A 7-day drop in supply combined with 150,000 fewer vehicles on lots is a massive market shift. The sales pace has not just accelerated; it’s now actively shrinking the available pool of new cars. This is the first sustained drop in total inventory this year and a major red flag.

The Supply Chain Disruption This isn’t a simple case of high demand, but a symptom of a deeply stressed supply chain. As we’ve detailed in our tariff report, the geopolitical pressures from earlier in the year caused supply chains to shutter and restructure. The whiplash effect of stalled import buying means that crucial parts—and entire vehicles—are not making it to lots. This is the bill coming due for those disruptions

This is a dangerous situation. While great for near-term automaker profits (as it reduces the need for incentives in an environment of already shrinking profits), it risks creating a “Fear Of Missing Out” (FOMO) style market reminiscent of the “chip shortage 2.0.” If production, potentially hampered by the tariff costs we’ve already reported on, cannot keep up with this demand, we will see a return to dealer markups and long wait times.

The Used Vehicle Story:

The Squeeze Intensifies The used car market is also tightening across the board, with the overall supply dropping by 4 days. But the real crisis is at the bottom of the market. A 31-day supply for cars under $15,000 is a critical shortage. These vehicles—essential for first-time buyers and families on a budget—are selling almost the instant they hit the lot.

The crisis at the bottom of the market was a predictable outcome. The lack of new car production from 2020-2022 created a permanent “hole” in the market. It guaranteed that the supply of 3-to-5-year-old used cars would collapse during this exact trade cycle, even if new car supply had been fixed. The cascading demand—where buyers are forced into older, higher-mileage brackets—has hollowed out the affordable segments, leading to today’s critical 31-day supply of sub-$15k vehicles.

This new car shortage will inevitably pour gasoline on the fire. As buyers are unable to find or afford the new cars they want, they will be forced into the used market, putting even more pressure on the already-tight 43-day overall supply and the critically low 31-day supply of affordable vehicles.

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The Big Question: What Happens Next?

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The narrative has flipped entirely in a single month. The question is no longer “When will automakers discount their excess inventory?” The question is now “Will there be enough cars to meet demand, and at what price?”

This is a complex and volatile situation, born from predictable, long-term trends that most have ignored. Join us this Thursday for our deep-dive narrative builder, “The Great Squeeze,” where we will connect these shocking inventory numbers with the recent inflation reports to reveal the true state of the U.S. auto market.

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