For the past two years, the auto retailing business has enjoyed exceptional performance. Those with the good fortune to be part of the industry have seen record profits driven by supply chain disruptions and an active M&A market with the capital to support growth plans and owner exit strategies alike.
How long can the good times roll? It’s hard to say just how long, but we can be assured that at some point, things will change. Given that reality, the plans that dealers put in place now and investments made over the coming year will position dealers to continue their success, no matter what lies ahead.
To understand potential changes and their impact, it’s essential to first look under the hood and see what’s been working well for dealers in the past couple of years:
More than anything else, auto retailing strength has been supported by an industry-wide vehicle supply shortage and robust consumer liquidity from several rounds of economic stimulus. The result has been the Golden Age of automotive retailing where the power of these positive forces has overwhelmed the industry’s intense competitiveness that usually keeps margins in check.
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Most predictions suggest it may take from one to three years for new vehicle inventories to return to historic levels, if they ever do. While conditions can shift quickly—who could have predicted the stellar industry performance of the past two years in April/May of 2020? —dealers should have enough time to put in place strategies that can help extend recent successes into the next era of auto retailing.
Everyone participating in the automotive retailing business is asking “what’s next,” and there’s plenty of conjecture about where the industry will go. From our conversations with dealers and industry leaders, there are seven trends to watch:
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At some point, today’s Golden Era will give way to the next era of automotive retailing. While there’s much we can’t predict, we can be sure that competition in our industry will remain fierce, with players with disruptive distribution models, retail consolidators pursuing greater scale, and new technology-driven competitors all seeking their piece of the auto retailing pie.
Local dealers have long relied on their unique ability to build relationships with their customers and pursue a more intimate customer journey to buying and owning a vehicle. The most successful ones will leverage that ability to connect with and engage customers with a state-of-the-art digital approach to buying and owning a car capable to winning with today’s customers. Coupling a relationship focus with technology excellence will sharpen the way dealers communicate with prospects, demonstrate their value during the buying journey, and earn that customer’s ongoing loyalty as an asset for the business.
For the many dealers across the country dedicated to serving their customers, their employees, and communities, there’s no higher reward.
Learn more about Dealer Services at Truist.
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Disclosures
1, Cox Automotive, VAuto, VMA Data, March 2022.
2, Cox Automotive/Moody’s Analytics Vehicle Affordability Index, February 2022.
Truist Bank, Member FDIC. © 2022 Truist Financial Corporation. Truist, the Truist logo and Truist Purple are service marks of Truist Financial Corporation.
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Truist Securities is a trademark of Truist Financial Corporation. Truist Securities is a trade name for the corporate and investment banking services of Truist Financial Corporation and its subsidiaries. All rights reserved. Securities and strategic advisory services are provided by Truist Securities, Inc., member FINRA and SIPC. Lending, financial risk management, and treasury management and payment services are offered by Truist Bank. Deposit products are offered by Truist Bank.
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New York City residents: Translation or other language access services may be available. When calling our office regarding collection activity, if you speak a language other than English and need verbal translation services, be sure to inform the representative. A description and translation of commonly-used debt collection terms is available in multiple languages at http://www.nyc.gov/dca.
Borrowers with Limited English Proficiency (LEP) needing information can use the following resources:
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