The U.S. automotive industry just had a strong quarter.

More than four million new vehicles were sold in July, August and September, according to estimates from Cox Automotive and Edmunds. That’s well above the same period last year, and puts the industry on track to sell over 16 million new vehicles this year, per Cox.

But that sales pace might be difficult to maintain as the industry faces growing headwinds from changing federal policies on electric vehicles and international trade. The third quarter coincided with the Sept. 30 expiration of federal tax credits for electric vehicles, causing a surge in EV sales that’s likely to be temporary.

That surge was apparent at Audi Oakland, where Daniel Kossut is general manager.

“We started August with over 75 EV units in stock, and we wrapped up September with only three left in stock,” Kossut said.

Kossut said his dealership marketed the end of the tax credit pretty heavily. But he also saw a lot of buyers who already knew they had a hard deadline to get that discount.

“They know what they're looking for. They're pretty savvy, and people knew this was it,” he said.

This EV sales rush ahead of the tax credit expiration is a classic example of a pull forward effect, said Karl Brauer, executive analyst at automotive information site iSeeCars.com.

“Anyone who was on the fence or seriously considering an electric vehicle purchase in the next three, six, nine months ran out and did it before the end of September,” he said.

So, those sales that might have otherwise occurred next January or April, happened in September instead. That pull forward made for the strongest quarterly EV sales in the U.S. on record: over 438,000 according to Cox Automotive. 

But now that the credit’s gone, “we're absolutely going to see a massive drop in electric vehicle sales for the next few months,” predicted Brauer.

That drop could have an impact on overall car sales in the months ahead. Because, if you look beyond EVs, sales in the third quarter, especially September, were on the soft side, Brauer said.

“An increasing number of people can't afford new cars, or they're taking out loans they probably shouldn't be taking out,” he said.

Eighty-four-month loans (that’s seven years) are getting more popular. The average monthly payment on a new vehicle is nearly $750.

Pair those figures with low consumer sentiment, and it’s not hard to see why Brauer and other analysts don’t expect a huge rush to dealerships around the holidays this year.

At the same time, automakers are facing rising costs of their own from the Trump administration’s tariffs, which are steadily eating into their profits, according to Tyson Jominy, senior vice president of data and analytics at JD Power.

“We estimate it's about $40 billion of tariff costs that automakers are absorbing, and that is equivalent to nearly 40% of global profits in the auto industry last year,” Jominy said.

So far, carmakers are mostly choosing not to pass those costs on to consumers in the form of higher prices. Jominy said that’s partly because they’re in a competitive industry. Every automotive company has a different supply chain, and therefore a different level of exposure to tariffs.

“Just because you have that cost as an automaker for producing overseas doesn't mean your competitors do,” Jominy said. “That is leading to very competitive price dynamics here in the U.S.”

However, car companies probably can’t eat those costs forever, assuming the import taxes stay in place.

“We would suspect that once we get into the new calendar year, 2026, you'll see some increases in those stickers of the vehicles that are being delivered to dealer lots in time for the spring,” said Jonathan Smoke, chief economist at Cox Automotive.

And the most affordable vehicles on the market, those under $30,000, are the most exposed to tariffs, Smoke said. That’s because they’re more likely to be assembled or include more parts from outside the U.S.

But hiking the cost of those cars, SUVs, and crossovers, “clearly challenges things for the consumer who's already stretching just to be able to afford a vehicle in that price point,” Smoke said. 

The auto industry does have one bright spot to look forward to in the new year: Tax refunds. After the GOP tax bill passed over the summer, tax refunds for many Americans could be substantial, Smoke said.

“It's amazing what cash-in-pocket does to vehicle demand and activity.”

But until tax season, it could be a long winter at car dealerships.