There are multiple reasons why new vehicle prices are rising. One is the supply of new cars and trucks is tightening.

Before the 2020 pandemic, there were 3 million to 3.5 million new vehicles on dealer lots, according to John Murphy, principal of Murphy Automotive Partners . Today, it’s closer to 2.6 million vehicles.

“We’ve never seen anything like this before,” Murphy said in an interview.

Murphy is a former auto analyst with Bank of America . He now runs his own firm.

He issued a report in June the “freshest” vehicle offerings will determine which automakers perform the best amid industry shifts.

One of those shifts is the tight supply of new cars and trucks. New vehicles cost about $50,000 on average .

Murphy said it will be “another one or two years” before vehicle supply “is corrected.”

“It’s a kind of unique environment,” he added.

Since 2020, there has been “an EV head fake,” the veteran industry analyst said.

During the administration of former President Joseph Biden (2021-25), the U.S. wanted automakers to boost output of electric vehicles. The policy was in parallel with China and Europe.

General Motors Co. CEO Mary Barra was a big believer in EVs.

“Once we have more affordable EVs…I think people will pick EVs,” Barra said at a “fireside chat” held by the Automotive Press Association in January.

“Our destination is to get to the all-EV future we’ve been talking about,” she said.

The second administration of President Donald Trump has been a different story. A $7,500 U.S. tax credit for EVs expired in 2025. Trump is unenthusiastic about EVs.

Under the Biden administration, automakers invested heavily in EVs and new EV models.

That’s not true under the Trump administration.

Now, automakers have more decisions to make about future product investment, Murphy said.

Automakers “shouldn’t be deploying large amounts of capital in any one direction,” he said.

What’s more, traditional automakers are coping with gains by the Chinese auto industry. That country subsidizes its automakers. China has also seen its auto companies speed up development of new models.

“Our companies are measured on profit and return,” Murphy said. Chinese automakers “are measured on stability.”

The U.S. has indicated it wants to avoid Chinese automakers getting a bigger footprint, Murphy said.

That may be more difficult said than done.

“No trade policy is going to fix that,” Murphy said.

An increasing number of U.S. vehicle buyers will consider buying a Chinese-made vehicle, a report released by Dave Cantin Group , an automotive retail M&A advisory company, said in August .