By Lucia Mutikani
WASHINGTON (Reuters) -Sales of U.S. light vehicles fell in October as the expiration of federal government subsidies undercut demand for battery-powered electric cars, and an easing labor market and looming higher prices from tariffs could limit any rebound this year.
Light vehicle sales decreased 6.5% to a seasonally adjusted annualized rate of 15.3 million units last month, data from market analysis firm Omdia showed. Unadjusted sales of electric vehicles dropped to 74,897 units from 98,289 units in September.
Republican President Donald Trump’s One Big Beautiful Bill approved by the U.S. Congress this year eliminated $7,500 tax credits for buying or leasing new electric vehicles and a $4,000 used-EV credit at the end of September. The subsidies, implemented by the previous Democratic Biden administration, boosted EV sales in recent years.
“Sharply lower electric vehicle sales, following the expiration of the federal tax credit on October 1, reduced dealer volumes over the month,” said Ben Ayers, senior economist at Nationwide Financial. “With concerns about the labor market building, the near-term outlook for auto sales could be soft as more consumers stay away from auto showrooms this holiday season.”
Overall unadjusted light vehicle sales were down 4.5% in October from a year ago. Last month’s sharp decline would suggest moderate or weak retail sales in October. But a 35-day shutdown of the government, on track to be the longest on record, has led to an economic data blackout.
The Chicago Federal Reserve is estimating retail sales excluding motor vehicles increased 0.3% last month after a projected 0.4% gain in September.
Limited data have suggested the labor market has remained stagnant since August, with layoffs still relatively low and hiring tepid. Economists say demand for labor has ebbed because of economic uncertainty, tariffs and companies embracing artificial intelligence. A sharp reduction in workers because of raids on undocumented immigrants is also weighing on the labor market.
A survey from the Conference Board last month showed consumers’ perceptions of the labor market remained downbeat in October. The unemployment rate was near a four-year high of 4.3% in August.
“Vehicle sales will face headwinds in the coming months,” said Grace Zwemmer, associate economist at Oxford Economics. “New vehicles are one of the most exposed sectors to tariffs. So far, foreign and domestic automakers have largely absorbed the costs through their profit margins, but this isn’t sustainable.”
(Reporting By Lucia Mutikani; Editing by Aurora Ellis)
