If you catch Santa Claus racing over the rooftops this Christmas, you may be in for a treat. For not only will the white-bearded wonder be bearing gifts aplenty, he might have made some serious upgrades to his ride.
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Out with the old bodywork and leather interiors, cheerio to the frayed reins and hello to SDR – (Self Drive Reindeers).
Revving Stocks
If he does, Santa could be laying out the path for his more earth-bound companions as they also consider ditching their old vehicles for new fangled models.
“U.S. vehicles have quietly aged in the background,” said David Russell, Global Head of Market Strategy at online brokerage TradeStation. “But now could be a tipping point when Americans need to stop putting bandaids on old cars and just get a new one.”
America’s recent love affair with used cars dates back to the pandemic. Following the impact of lockdowns on auto supply chains and key components like semi-conductors, there was a drop in the number of new cars being built in the U.S. and a surge in demand for used cars.
This squeeze led to an increase in prices with, according to car shopping website Edmunds, a 3-year-old used vehicle climbing from around $20,000 in early 2020 to just over $30,000 in early 2025.
The growth was so strong that commentators warned a ‘used car bubble’ had been formed. But there are signs that this bubble is finally about to break.
Used Bubble Bursts
Figures from Cox Automotive show that nationwide, dealers – both franchised and independent – had a total supply of 2.26 million used vehicles on their lots at the beginning of October. That figure was 3% higher than the 2.21 million in early September and is 10% higher than the same time last year.
In addition, the average days to turn — the number of days a vehicle sits on a dealer lot before a sale — for used vehicles is now around 38 days, four more days than a year ago.
Adding to the gloom, used retail sales were at 1.42 million vehicles in September, down from the 1.50 million reported in August.
Despite tariff uncertainty, in contrast, Cox Automotive has forecast that there will be 1.30 million sales of new cars in October, up from 1.26 million in September.
That’s been helped by sales of EVs which accelerated before the $7,500 tax credits expired at the end of September. Indeed, EV sales volumes in the U.S. hit an all-time high in Q3 2025, reaching 438,487 units sold.
Other factors behind the new car resurgence include supply chains now back into gear post-Covid and more driver incentives on offer.
Figures from Edmunds show that value is another factor with the gap between used and new car prices moving to under $17,000 for the first time since 2022.
The recent Consumer Price Index figures also show the demand trend with used car prices down 0.4% and new cars up 0.2% in September.
As Russell pointed out, America’s existing fleet of cars is also beginning to show their age. The average age of vehicles in the US continues to climb, reaching 12.8 years in 2025, according to analysis from S&P Global Mobility.
Despite the resurgence in new car sales, a relatively stable 4.5% scrappage rate means that older vehicles are staying on the road longer, steadily increasing the average age of the fleet.
That reduces their value and increases maintenance and wear and tear costs for drivers spluttering from their home down to the shopping mall.
Stocks Impact
The shift in gears back to new vehicles is expected to keep some U.S. auto stocks humming but leaving others rusting in the side road.
General Motors (GM), whose brands include Cadillac and GMC, is up over 50% in the last 6 months, with Ford (F) up 32%, and Stellantis (STLA), home to Chrysler and Dodge, up 7%.
The road looks clear for further new car driven growth. Much of that will be sparked by the evolution of AI as our traditional industrial heartland auto manufacturers morph into those sun-kissed, grooving tech companies from out West.
General Motors, for example recently unveiled plans to make future vehicles more like intelligent companions than simple machines. It is partnering with Alphabet (GOOGL)-owned Google and integrating its Gemini AI assistant into its next wave of cars.
AI Boost
The tech, powered by a centralized computing platform and LiDAR, will first appear in the $127,000 Cadillac Escalade IQ EV in 2028. Okay, not exactly in the wheelhouse of the ordinary driver but a further sign of how automation, rather than smoky old engines and worn-out brake pads, are the future of driving.
The classic example of the fusion between track and tech is EV maker Tesla (TSLA). Earlier this year its chief executive Elon Musk announced that Tesla will double its U.S. vehicle output over the next twenty four months. This move aims to strengthen Tesla’s place in the market and ease worries about slowing sales in China and Europe.
It is also ramping up its plans for its autopilot and Cybercab robotaxi offerings. At its recent Q3 earnings call Musk focused on Tesla’s long-term push into AI and self-driving technology rather than near-term profits. “I think that Tesla has the highest intelligence density of any AI out there in the car,” he said, adding that the company is “scaling quite massively” with its Robotaxi ambitions and feels “confident in expanding future production.”
AI can also help an automaker’s bottom line with Ford’s Q1 25 earnings report noting “substantial cost savings” from AI projects such as a robot dog from Boston Dynamics. COO Kumar Galhotra said that the dog “literally walks around the plant all day long, and has changed how we do our preventive maintenance, because it can see and hear and look for error states well before a human being could.”
Even though a robot dog sounds cute and a robotaxi sounds futuristic and convenient, AI could replace a significant number of white- and blue-collar motor industry jobs in the months and years ahead.
Cost Cuts
Automakers are already in a cost-cutting frame of mind with General Motors announcing this week that it is cutting 1,750 jobs at its U.S. manufacturing plants. That comes on top of a plan to eliminate 200 salaried workers, mainly Computer-Aided Design engineers, among its corporate ranks to reduce costs and boost profitability.
Indeed, the company now expects full-year EBIT-adjusted profit of $12 billion to $13 billion and free cash flow of $10 billion to $11 billion.
Ford told staffers earlier this year that only half of 3,300 middle managers will get stock award bonuses. The aim was to boost productivity and appears to be paying off with Ford reporting a record $50.5 billion in revenue for Q3 and an adjusted EBIT of $2.6 billion.
“While automakers assemble vehicles, they also have significant managerial layers that can be reduced with AI,” said Russell.
Other stock winners from the demand for shiny new vehicles, technological advancement and cost-cutting include Toyota Motor (TM), whose shares are up 14% in the last 3 months, automotive seating and electrical systems maker Lear (LEA), automotive supplier American Axle (AXL) and vehicle technology group BorgWarner (BWA).
Stocks in Reverse
On the flipside is used vehicle retailer CarMax (KMX) whose share price has plunged around 31% in the last 6 months.
In Q2 CarMax reported total sales of $6.6 billion, a 6% decline from the previous year, with retail unit sales down by 5.4%. The average selling price was $26,000, showing a year-over-year decrease of $250 per vehicle.
CEO Bill Nash said the company had ramped up inventory following stronger sales in March and April amid tariff speculation but saw about $1,000 in depreciation per vehicle from mid-May through June, pressuring margins and sales.
To offset the impact, CarMax said it cut retail margins to spur demand and deliberately slowed purchases to better align inventory with sales.
AutoNation (AN) in its Q2 figures reported that used vehicle unit sales increased by 4% overall, with gross profit increasing by 3% year-over-year. However, it added that strong competition for retail-grade used inventory led to upward pressure on wholesale prices.
Other stocks potentially stuck in the slow lane include aftermarket parts supplier O’Reilly Automotive (ORLY) as new cars regain their edge and fellow replacement parts group AutoZone (AZO). Online used cars platform Carvana (CVNA) could also suffer in the new environment.
Detroit Wins
But given that it’s near Christmas and Santa is making sure there is enough oil in his brand-new engine, there is one further factor which should give all motor-related stocks a lift-up.
That is the continued downward trajectory of interest rates as the Federal Reserve responds to stuttering economic data such as inflation and labor market weakness.
“U.S. automakers may benefit from stronger demand, cost cuts and lower interest rates thanks to Jerome Powell and the Federal Reserve,” Russell said. “Many investors focus on how softer monetary policy from the Fed might boost housing, but automakers could be even bigger beneficiaries. Rate cuts not only help buyers get new cars. They also lower debt-servicing costs for GM and Ford. It could be a win-win for Detroit.”‘
It might even be a win for Lapland. Perhaps this could make Santa ditch the sleigh entirely or impress Mrs Claus with a second car in the tinsel-covered drive.
Look, say the children of America pointing to the sky one starry Christmas Eve – “Santa Claus is coming to town, and he’s driving a brand-new Chevy!”