How Auto Dealers are Preparing for the Future of the Automotive Industry

Pressures caused by supply chain issues, the increasing use of ride-hailing services, and the downward trend of the economy are all impacting auto dealers and the ways in which they do business. As dealerships look to the future, it is important for them to anticipate industry-wide changes so that they can meet consumer demand and continue to grow their profits. Here are some things you should know about preparing for the future of the automotive industry so that you can stay ahead of the curve.

What Will the Future Bring?

It’s important to begin by understanding the trends within the automotive industry and where they might lead. According to a 2016 study by McKinsey & Company, new car sales were expected to drop to around 2% growth per year down from 3.6% by 2030. However, that study was completed before the pandemic, the current economic downturn, and the supply chain issues, which have caused a greater slowing in new vehicle sales. Other factors that might affect the automotive industry now and in the future include the following:

• Decline in young people getting driver’s licenses

• Increased availability and use of rideshare services

• New competition from online car dealerships such as Carvana and Vroom

• Rise of electric vehicles and other green vehicle technology

In the past few decades, there has been a sharp decline in the number of young people who obtain driver’s licenses. Many younger people see little need to drive when they can simply use rideshare services to get where they need to go. According to a report in USA Today, the percentage of 18-year-olds with driver’s licenses in 2018 was only 61%, which was a significant drop from the 80% of 18-year-olds who were licensed in 1983. With the increasing retail prices for cars, some young people might also be priced out of the market.

At the same time, online dealers are bringing new competitive pressures to traditional car dealerships. Auto dealers no longer only have to worry about the nearby brick-and-motor dealership down the street, but they must now also worry about competition from online dealers like Carvana and Vroom that allow consumers to purchase vehicles online and have them delivered directly to their driveways. Savvy auto dealers are taking steps now to be fully prepared as the industry changes. Below are some things to consider as you prepare to embrace the future.

1. Consider Your Auto Dealer License

One place to start is your auto dealer license. Consider whether it is the right type you need. For example, if you have a franchise auto dealer license but do not have a license to sell used vehicles, you might want to consider getting an additional license to allow you to do so. The chip shortage has led to a depressed inventory for new vehicle dealers, so you might want to focus more on developing an inventory of used vehicles built from trade-ins, auction buys, and end-of-lease returns to reach more prospective buyers. You will need to purchase a surety bond before the state will issue a license to you to deal in vehicles, so make sure you do so.

2. Investigate New Methods of Marketing

Since more consumers are choosing to purchase vehicles online instead of visiting dealerships in person, you should consider new marketing tools to reach prospective customers where they are at. Your dealership needs an online presence that uses predictive marketing tools to reach a broad customer base. You should have a website and a professional car dealer photographer in order to harness the power of social media marketing and reach potential customers with smart ads, interesting blogs and captivating images. Once a customer purchases a vehicle from you, maintaining communication can help you to build a relationship so that your customer will remain loyal to your dealership and return in the future to make new purchases.

3. Understand the Target Demographic

McKinsey & Company reports that millennials will make up 45% of the car-buying population in the U.S. by 2025. This makes it critical for you to understand their preferences and needs. Younger adults report a dislike of long waits and sales pressure when visiting dealerships, so you should adjust your approach accordingly. Some of the ways you can modify your sales approach to attract more millennials and Generation Z members include the following:

• Streamline the paperwork so that it is more efficient and less time-consuming for buyers.

• Be transparent and offer information digitally to allow customers to view your inventory online in real-time, schedule test drives, and compare financing options before they visit your dealership.

• Use automated platforms to make the buying experience seamless.

Making the car buying experience easy, fast, and predictable might help you to reach customers in your target demographic and turn them into loyal buyers who will return to your dealership again and again in the future. Happy buyers might also refer their friends and family members to your dealership, helping to expand your potential customer base.

4. Consider Selling Green Car Technology

Rising fuel prices and concerns about climate change have combined to make electric vehicles increasingly popular. McKinsey & Company reports that electric vehicle sales have risen by more than 40% since 2016, representing a bright spot in the automotive sales landscape. Electric vehicles are expected to dominate the market by 2035, making now a good time to get into selling these green vehicles. Becoming a franchise dealer for electric vehicle sales might help you to stay ahead of the market and attract new, loyal customers.

5. Sell Good Used Vehicles

You might stay ahead of some of the supply chain issues involving chip shortages and a depressed new vehicle inventory by choosing to sell good used vehicles. Make sure that the used vehicles you offer are in good working condition, and be honest with your customers about any issues they might have.

Trying to anticipate what might happen in the future can be difficult. However, by recognizing the trends in the automotive industry, it is possible for you to make changes now that will enable you to continue being successful in the future. No matter what else you might do, make sure to always comply with the law and your bond requirements to facilitate the success of your business.


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