Despite existing operational and new economic headwinds in 2022, auto dealers continued to produce record profits. As we wind down the year and look towards next year, we look back to see what was popular with you—our loyal readers. These are your favorite posts of 2022, which all highlight opportunities or threats to the traditional auto dealership.
Future of Auto Dealerships
In this blog post, David Harkins discussed the inventory challenges dealers continued to face in 2022. David also posed the question: would prevailing supply conditions fundamentally change the franchise dealer model? After reviewing the history of the franchised dealer network in the United States, David highlighted the concept of direct selling. We have definitely seen some shift to direct selling with some manufacturers more so than others, mostly with their Electric Vehicles (EVs).
Just as our recent World Cup post paired an auto dealer topic to sports, Scott Womack paired auto dealer succession planning to the NCAA March Madness tournament. This post explained some of the key considerations for business valuations in connection with succession planning in a March Madness-style bracket. Succession planning continues to be top of mind for aging dealers as they identify the next generation of owners within their immediate or extended families.
Rideshare: Friend or Foe to Auto Dealers and Manufacturers
The current batch of threats to the auto dealerships’ success seemed to center around the adoption of EVs and the continued development of autonomous vehicles. A few short years ago, the newest/biggest threat to auto dealers was thought to be rideshare. In this post, Harrison Holt presented the anticipated effects of ridesharing on the auto industry, along with the resulting shift from the pandemic. While we expect rideshare to continue coexisting with auto dealers, the industry has proven that it can survive and flourish despite these outside threats.
Smart Connected Cars, OTAs, and Their Impact on Auto Dealers
No, we weren’t commenting on the compact, fuel-efficient design models resulting from the discontinued venture between Swatch and Mercedes-Benz. We were referring to connected cars that operate like smartphones or smart appliances. In this post, Scott Womack discussed the size of the connected car market and informed our readers about Over the Air Updates (OTAs) and their ongoing connection with auto dealership service departments. Despite having disadvantages, OTAs provide some advantages and opportunities for auto dealers with new service department revenue sources.
Carvana Is Looking More Like Icarus
Another market disrupter to auto dealers has been Carvana. With its iconic car vending machines, Carvana attempted to reduce its real estate footprint compared to traditional auto dealerships. The company initially stood out with its online-first presence to capture digital sales. In this post, David Harkins discussed Carvana’s strategies to scale its business platform and its most recent challenges and struggles. Along the way, the Carvana narrative provided several key takeaways for auto dealers to capitalize on consumer-centric shifts in the car buying space.
Powersports: Alternative Growth Opportunity for Auto Dealers
Another emerging opportunity for auto dealers with excess cash from continued profits or remaining PPP funds is an investment in powersports. Powersports franchises operate similarly to traditional auto dealerships. Auto dealers with the skills and experience to sell high volumes of automobiles would also possess the necessary skills to succeed in the powersports industry. In this post, Scott Womack educates readers on the powersports industry, including the similarities and differences to traditional auto dealerships. More of our dealership clients continue to add alternative investments in powersports franchises adjacent to their existing markets.
We look forward to 2023 and appreciate your interest in our Valuation Insights blog. We will round out the year with the final SAAR blog post and another installment of our ‘Twas the Blog Before Christmas,” highlighting the past year in the auto dealer industry. May you and your family enjoy a happy holiday season and a prosperous new year!