Despite a strong start to the year, rising tariffs, inflation, and consumer caution may soften California’s automotive outlook for the second half of 2025
Sacramento, Calif.—The California New Car Dealers Association (CNCDA) released its Q2 2025 California Auto Outlook Report on Tuesday, analyzing new vehicle registration trends for the first half of the year. Here are the highlights.
Tesla has experienced seven quarterly registration declines in the state. The automaker had an 18.3 percent drop in registrations compared to the first half of 2024. The direct-to-consumer automaker lacks a robust dealership network for sales support, which may have contributed to a 2.7 point decline in its market share year-to-date, with Q2 alone seeing a 2.9 point decrease.
This decline pulled down the overall Zero Emission Vehicle (ZEV) share in the state, which fell to 18.2 percent this quarter and 19.5 percent year-to-date, down from 22.0 percent in 2024.
Alternatively, hybrid vehicles are gaining momentum. Registrations for hybrids have climbed 54 percent so far this year, now accounting for 19.2 percent of the market, totaling 181,192 registrations. Gasoline and diesel vehicles continue to lead, with internal combustion engine (ICE) models making up 57.5 percent of the market.
“Dealers are focused on what Californians are buying, not just what policymakers want them to buy,” said Robb Hernandez, CNCDA Chairman and president of Camino Real Chevrolet. “It’s clear many consumers still face barriers to going fully electric, whether that’s due to affordability, lack of infrastructure, or range anxiety.”
ZEV Progress Slows as Policy Clouds Gather
California’s Advanced Clean Cars II (ACC2) regulation, which required 100 percent ZEV sales by 2035, has encountered legal and political headwinds. The rule, set to take effect starting with model year 2026, required each manufacturer to sell 35 percent ZEVs, which would have been challenging considering this quarter’s backslide to just 18.2 percent of ZEV sales (the lowest since Q3 2022).
While the mandate was invalidated earlier this year under the federal Congressional Review Act, litigation from the Newsom administration is ongoing, and the future of ACC2 (or a newly revised version) remains uncertain.
With hybrids gaining popularity and Tesla’s decline dragging down overall ZEV numbers, California policymakers’ ZEV-only strategy may need realignment. Notably, combined alternative powertrain vehicles (hybrid, plug-in hybrid, BEV, and fuel cell vehicles) account for 42.5 percent of new vehicle registrations statewide. Meanwhile, the state’s share of national ZEV registrations remains strong at 28.6 percent.
Brand Market Share and Summary
Toyota continues to lead the California market with a 17.3 percent share, followed by Honda (11 percent), Tesla (8.8 percent), Ford (7.7 percent), and Chevrolet (6.6 percent). Brands showing strong year-to-date growth include Buick, Jeep, Acura, Genesis, Cadillac, Land Rover, and Chevrolet, each posting increases of over 20 percent in registrations compared to the same period last year.
Model Segment Rankings
Top-selling passenger cars so far this year include the Tesla Model 3 with 31,394 registrations (12.6 percent share), followed closely by the Toyota Camry at 30,490 (12.2 percent), and the Honda Civic at 28,531 (11.5 percent).
Leading light truck models include the Tesla Model Y (6.3 percent share), Toyota RAV4 (4.9 percent), and Honda CR-V (4.3 percent).
Regional Variances
Regional data shows steady growth across the state. The San Francisco Bay Area rose 3.4 percent, Los Angeles and Orange Counties climbed 2.3 percent, and San Diego County increased by 2.5 percent. Northern California led the state in BEV share at 23.0 percent, while Southern California held at 20.7 percent.
Statewide Impacts
Despite a strong start to the year, rising tariffs, inflation, and consumer caution may soften California’s automotive outlook for the second half of 2025. Statewide, 944,834 new vehicles were registered during the first half of 2025, marking a 6.6 percent increase over the same period last year.
New vehicle registrations were also up 5.5 percent in Q2 2025 compared to Q2 2024. The forecast for total 2025 registrations is 1.72 million, slightly below last year’s 1.75 million total.
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