Preparing for transition
A View of the Dealership Industry in the Year 2025
In 2013, a group of industry leaders engaged in a strategic planning process to develop a framework for what the automotive industry might look like in the year 2025. The result of the process was the development of a white paper that was presented at the 2014 National Automobile Dealers Association conference along with a workshop on the future of the dealership.
The industry leaders who participated in the process included dealers with operations of various size and scale, dealership attorneys and bankers, and members of AutoTeam America (ATA), a national association of CPAs serving dealers across the country. ATA also conducted a survey of approximately 100 dealers on what they believe to be the future of the automotive industry in the year 2025 and incorporated that feedback in the white paper.
The survey indicated many dealers anticipate continuing shifts in consumer shopping habits, much greater utilization of technology both in the store and by consumers in advance of visiting the dealership, and an increased level of regulatory scrutiny. The study also indicated there will be multiple paths to profitability for dealers and a steady increase in buy/sell activity as the current generation of dealers transition out of the business.
As a result of the shift in consumer demands, significant advances in technology, and continued pressure from manufacturers, we see the following trends occurring in the dealership industry by 2025:
- There will be a higher turnover of stores in the next decade as current owners retire.
- Factory influence over the day-to-day operations will expand, and the most costly requirements will cause some dealerships to sell.
- If current corporate average fuel economy (CAFE) standards remain, nearly all vehicles will be hybrids or zero emission vehicles (ZEVs).
- Dealership value will increase as the earnings multiples continue climbing.
- Shrinking gross profit margins will need to be offset by a lower cost structure.
- Technology advances will continue to change the communication channels with consumers.
- Technology and regulatory changes will transform the finance department.
- Consumer regulations will continue to shape the dealer’s business model.
Dealers in the study also expect to face pressure on their facility's sales process and customer satisfaction, profitability, and staffing. It will take a comprehensive approach to drive your dealership's value through these changes. Many dealers are already tackling the issues presented in the white paper, including developing strategic plans for the future of their dealership. We can help you develop strategies and plan for the changes ahead as the pace of change in the industry accelerates.