Car Dealers – 2023 and the Future

The automotive industry has experienced significant transformations in recent years, and as we step into 2023, the burning question is, what does the future hold for the car business? To understand this, let’s take a brief journey through the recent past and examine the current challenges and potential directions for the automotive landscape.

From Boom to Bust: A Recap of Recent Years

In 2018 and 2019, the car business was booming. Dealerships were brimming with inventory, offering consumers a vast array of choices. Negotiations were common, and buyers could secure great deals with substantial discounts. Fast forward to the pandemic, and the industry faced unprecedented challenges. Lockdowns disrupted supply chains, leading to empty lots and a scarcity of both new and used cars. The situation persisted into 2022, with only a slight improvement in inventory levels.

Manufacturers on the Mend, but Demand Wanes

Manufacturers are gradually resuming car production, but the question remains – do they want to? Demand, a driving force in the industry, is showing signs of decline. The surge in car prices, with the average new car costing around $46,000, coupled with interest rates of 6-7%, is leading to what experts term “demand destruction.” With monthly payments reaching a thousand dollars or more, consumers are reevaluating their car-buying decisions.

Electric Avenue: A Fork in the Road for Manufacturers

Adding complexity to the equation is the looming shift toward electric vehicles (EVs). Some states have set ambitious goals, aiming to disallow the sale of gasoline vehicles by 2030. This puts manufacturers in a dilemma – invest in gasoline vehicles or pivot to electric? The lengthy lead time for developing new models further complicates this decision-making process.

Used Car Dealers Facing Headwinds

The challenges extend beyond new car dealerships to the used car market. Major players like Carvana, CarMax, and Vroom are encountering volume and profitability issues. While new car dealerships have diversified revenue streams, including services and parts, the future viability of large dealership footprints comes into question.

Potential Future Scenarios: Smaller Footprints and Fixed Pricing

Looking ahead, we may witness a transformation in dealership structures. Smaller footprints, with reduced lot sizes, could become the norm. Rather than housing hundreds of cars, dealerships might opt for a curated inventory, embracing a model where customers order vehicles tailored to their preferences. This shift is reminiscent of the Carvana approach, characterized by a smaller physical presence.

Fixed pricing is another aspect likely to evolve. While fixed pricing eliminates the need for negotiations, some consumers appreciate the art of the deal. Striking a balance between transparency and flexibility will be crucial for dealerships in 2023.

The Customer Dilemma: To Negotiate or Not?

As the industry evolves, consumers face a dilemma – negotiate for the best deal or embrace fixed pricing for simplicity? The answer varies based on individual preferences and negotiation skills. The debate between securing a deal and the convenience of fixed pricing will likely shape consumer interactions with dealerships in the coming years.

The Road Ahead: Uncharted Territory

The car business in 2023 and beyond is navigating uncharted territory. The delicate balance between consumer demand, manufacturing decisions, and evolving dealership models will shape the industry’s landscape. As a consumer, being informed and adaptable will be key to making savvy choices in this dynamic automotive environment.*

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