Introduction
2024 is poised to mark a period of stabilization and cautious optimism within the automobile dealership sector, following the tumultuous years prompted by the pandemic.
Cox Automotive has issued an economic report for 2024, with insights from their Chief Economist, Jonathan Smoke, who foresees a tempered growth outlook due to the impact of high interest rates and gradually receding inflation levels, which are expected to restrain consumer spending. Nevertheless, a transition toward a buyer’s market is on the horizon, characterized by the resurgence of incentives and heightened competition among dealerships, marking a departure from the seller-dominant environment of recent years.
Challenges
In response to the challenges ahead, dealerships are proactively seeking cost-saving measures to uphold profitability. While used car sales and service departments are anticipated to thrive, new car sales face hurdles attributed to escalating manufacturer prices (MSRPs) and dealer costs (invoices), potentially squeezing profit margins amid consumer price sensitivity. Furthermore, the uptick in interest rates and the imperative to invest in electric vehicle (EV) infrastructure pose additional financial strains for dealerships. Consequently, many dealerships are adopting a cautiously optimistic approach towards sales, prioritizing strategies to navigate economic headwinds and secure long-term viability.
Although electric vehicle (EV) sales are projected to continue their upward trajectory, the pace may be slower than initially forecasted, influenced by factors such as fluctuating demand, affordability challenges, and inadequate charging infrastructure. Recent closures of EV plants underscore a recalibration within the industry, revealing that consumer adoption of new EV models in the U.S. market hinges heavily on subsidies or financing incentives.
Trends
The trend towards online vehicle purchasing has gained momentum in recent years, necessitating dealerships to bolster their digital retailing capabilities and enhance online sales and customer service platforms. While physical presence remains integral to dealership success, effective online marketing and management strategies are pivotal in distinguishing between thriving and struggling dealerships. Cox Automotive anticipates a return to equilibrium in the U.S. auto market in 2024, heralding improved prospects for American consumers and fleet buyers who can expect a wider array of choices, enhanced deals, and greater accessibility to online purchasing tools.
Conclusion
Ferguson Appraisals has vast experience appraising automobile dealerships throughout Colorado, Wyoming and South Dakota. For current trends and insights, please contact us to assist with your investment needs. Other market insights can be sought from Cox Automotive at the link below.
Cox Automotive Insights