Replay Available: Cox Automotive Q4 2025 Industry Insights and 2026 Forecast Call

Cox Automotive has posted a replay of its Q4 2025 Industry Insights and 2026 Forecast call, delivering a final update on the U.S. new, used and electric vehicle markets for 2025 and presenting expectations and forecasts for 2026, including five forces expected to shape the auto market. The release is informational and provides guidance and analyst viewpoints useful for updating sector models and dealer/OEM assumptions, though it contains no new hard financials; for follow-up contact Mark Schirmer or Dara Hailes.

Analysis

Market structure: Cox Automotive’s 2026 framing (new/used/EV forces) implies winners will be franchised dealers and vertically integrated OEMs with service revenue (AutoNation AN; Ford F with dealer networks), while pure-play used-car retailers and leveraged retail platforms (Carvana CVNA, CarMax KMX) will face margin pressure as used-car prices normalize (we project a 5–15% national used-price decline through 2026). Pricing power shifts to OEMs that can monetize software/aftermarket and to battery/commodity suppliers who control critical input supply (lithium, copper). Cross-asset impact: wider auto ABS spreads and shorter-duration pressure on high‑yield auto suppliers if defaults tick up; commodity upside for lithium/copper supports miners (ALB, SQM) while stronger dollar would cap commodity gains.

Risk assessment: Tail risks include a sharp macro slowdown (GDP down >1% q/q) triggering a 150–300bp rise in delinquencies on auto loans and widening auto ABS spreads by >200bp within 3–6 months, and abrupt EV subsidy rollbacks hitting demand in 6–12 months. Immediate risks (days-weeks) are rehypothecation of inventory financing and earnings misses; short-term (months) risks center on used-price volatility and credit tightening; long-term (years) are regulatory battery supply constraints and raw-material nationalism. Hidden dependencies: dealer cash flows hinge on financing spreads and wholesale channels (Manheim index moves), and EV adoption sensitivity is non-linear to incentives.

Trade implications: Direct plays — overweight AutoNation (AN) and selective EV miners (ALB) with modest sizes (1–3% each) for 6–18 month horizons; underweight/short KMX/CVNA as margins compress. Pair: long AN / short KMX (beta-hedged) to isolate used-price normalization. Options: buy 9–18 month LEAP call exposure to TSLA (0.5–1% notional) to capture upside in EV growth while selling nearer-term calls to finance premium if volatility spikes. Reallocate credit: trim HY auto supplier exposure by ~30% into IG parts manufacturers (APTV) and into ABS only when spreads >350bp.

Contrarian angles: Consensus focuses on headline EV growth; we see an underappreciated bifurcation — dealers and software-enabled OEMs capture more margin share while commoditized used-car retailers lose it. The market may underprice a 10–15% normalization in used prices and overprice perpetual EV demand growth; that creates mispricings in retail platforms (short) and lithium miners (long) depending on realized EV incentive policy. Historical parallel: 2015–2017 used-price normalization hit margins faster than consensus expected; similar speed would favor defensive dealer/service exposure and long-dated optionality on OEMs with clear software monetization.

Key Decisions for Investors

• Establish a 2–3% long position in AutoNation (AN) over 6–12 months to capture service/recurring revenue resilience; set a tactical stop-loss at -12% and trim on +20% upside or if national used-vehicle index rises >5% month-over-month.
• Initiate a market-neutral pair: long AN (2%) / short CarMax (KMX) (2%) for 3–9 months to play used-price normalization; close positions if Manheim US Used Vehicle Value Index reverses by >5% for two consecutive months.
• Allocate 0.5–1% notional to a 12–18 month LEAP call on Tesla (TSLA) (buy-to-open) to capture asymmetric upside from EV share gains, funded by selling 3–6 month covered calls equal to ~50% of delta to finance premium; exit or hedge if global EV incentive rollout contracts by >25% vs Q4 baseline.
• Add 1–2% exposure to lithium exposure via Albemarle (ALB) or SQM for 12–24 months, but cap position and set contingent sell if lithium spot falls >20% from entry or if auto ABS spreads widen >200bp (signaling demand credit stress).
• Reduce high-yield auto supplier and auto-ABS exposure by ~30% over the next 90 days and redeploy into IG auto suppliers (e.g., Aptiv APTV) or cash; only re-enter HY/ABS when spreads trade above 350bp (indicating compensation for elevated default risk).