U.S. auto industry trends aren’t very positive these days with auto dealers watching forces beyond their control put a damper on dealership sales and profits. But while the global auto sales industry forecast is largely negative, a slate of exciting new vehicles and advances in the ways dealers identify, engage with, sell to, service and retain customers mean it’s not all gloom and doom for auto sales in 2020. In this blog, Mastermind shares insights on:
- The automotive sales forecast for 2020
- Emerging revenue opportunities for car dealers
- New vehicles and model updates in 2020
2020 Auto Sales Forecast
2019’s auto sales trends haven’t been great, with the industry down by 2.4 percent in July and on trend through September for sales numbers to finish below 17 million in sales for the first time since 2014. Even China saw its first-ever decrease in new-vehicle sales.
At the international level, the trade war between the U.S. and China has had a broad array of impacts on the auto industry, while many economists and other experts are predicting the global economy could slide into recession in 2020.
Some industry watchers believe that even without major economic shocks such as an expanded trade war, labor unrest or broader recession, there are still a few lean years left for the auto industry, in what IHS Markit has called a “declining plateau.” For instance, Merrill Lynch senior auto analyst John Murphy predicts that the soft auto industry market will continue softening through 2022, bottoming out at 14 million vehicles per year. Meanwhile, Moody’s Investors Service researchers predict a 0.9 percent decline in auto sales in 2020, with the potential for recovery in the following year.
However, there could be some hope for car dealerships on the horizon. During an Automotive Press Association luncheon in October, NADA 2019 Chairman Charlie Gilchrist announced the organization’s support for the United States-Mexico-Canada Agreement (USMCA), calling it a “win” for dealers.
“Congress should pass USMCA to preserve competition in the auto industry and to enable dealers to continue providing affordable vehicles to millions of Americans without interruption—and they should do so expeditiously,” said Gilchrist.
If implemented, the agreement would ensure the continuation of tariff-free exchanges of vehicles and auto parts across North America.
New Revenue Opportunities for Dealers
A McKinsey and Co. analysis of new vehicle sales found that while sales prices have been largely flat in real terms since 1998, the constant stream of new technologies and features has continued to drive per-vehicle profit margins down across the industry. In combination with the average customer loan amount hitting record highs, there are real concerns about affordability being raised industry-wide. Only by searching out and embracing opportunities for efficiency in their operations have automakers and dealers alike been able to maintain their bottom lines.
If dealers aren’t making as much money on new vehicle sales, many will try to make up the difference in fixed ops revenues, including collision repair. This trend is already gaining traction, with parts and service revenues growing from slightly more than $80 billion in 2002 to more than $116 billion in 2018.
But there may be challenges ahead there, as well: AlixPartners predicts that as self-driving cars and collision avoidance technologies continue to mature, collision repair revenues will fall as there will be fewer collisions to repair. While many of these technologies are a few years off from widespread deployment, AlixPartners’ researchers predict a six percent drop in aftermarket collision repair revenues between 2025 and 2030.
However, the service drive and body shop also offer revenue opportunities beyond just parts and repairs. By treating the service drive as a source of leads, dealers can tap into a well of high-quality conquest customers who will likely be in the market for a new vehicle in the future, which can make a critical difference on a dealership’s bottom line.
2020 New Car Models
Auto dealers know that while external economic issues certainly matter, the biggest factor for their business is what’s sitting on the showroom floor. From this perspective, the 2020 future looks bright.
A steady parade of new and updated cars, trucks and SUVs are arriving in showrooms for the 2020 model year. The list of new car models includes a little bit of everything: New and updated flagship SUVs, refreshed high-volume sedans, electrified versions of well-known platforms, high-tech performance vehicles, the return of beloved nameplates and some new competitors are already making their 2020 debuts. Of the dozens of new vehicle models slated for 2020, standouts include the all-new Audi Sport EV, BMW 2 Series Gran Coupe, Land Rover Road Rover and Porsche Taycan Cross Turismo. Of course, there’s still plenty of time for unexpected announcements and surprise debuts.
With so much change on the horizon for the 2020 auto industry, now is the time to ensure your dealership is prepared to weather whatever comes your way in 2020 and beyond. Do you have the right automotive data solutions in place to ensure that you’re identifying and effectively selling to every possible customer no matter how competitive the marketplace gets? Can you be confident that your customer experience capabilities ensure that you’re retaining every customer you want to keep, while being strategic and effective in conquesting the best prospects from your competitors?
Contact us today and learn how the Market EyeQ sales platform can help your dealership evolve to meet the challenges of tomorrow.