Data & Insights

5 Key Learnings from The Presidio Group's Q3 2023 Auto Retail Report

The automotive industry is a dynamic space, constantly evolving to meet changing consumer demands and economic conditions. The Presidio Group, known for its investments in technology companies within the auto retail sector, recently released its Q3 2023 Auto Retail Report, providing valuable insights into the current state of the industry.

Let's delve into five key takeaways from this report:

  1. The Great Normalization: The report highlights a new short-term era characterized as the "Great Normalization." Following a period of imbalance where production and vehicle inventory misaligned with demand, this era marks a reset for the auto retail sector. With the industry entering a phase of mergers and acquisitions fueled by advanced retail technology, the Great Normalization is set to shape the automotive landscape in the near term.
  2. Economic Headwinds: Despite a low unemployment rate, the industry faces economic headwinds in the form of inflation, higher interest rates, and reduced consumer savings. These factors are posing challenges as inventory levels recover, affecting vehicle margins, particularly for domestic-brand automakers.
  3. Impact on Profitability: The report reveals a decline in profitability indicators in the auto retail sector. Gross profit per new vehicle retailed has dropped by 26.2%, and F&I income per retail unit is down by 8.1%. This shift is indicative of the changing landscape as margins revert to pre-pandemic norms.
  4. Dealer Sentiments: Conversations with dealers across the country revealed a slowdown in sales, declining profits, and rising expenses, with November being described as particularly challenging. The once extraordinary profitability experienced during the pandemic has given way to a more balanced, albeit challenging, market.
  5. Dealership Transactions and Desirability: While dealership transaction volume declined by approximately 11% compared to the record-setting 2022, the report indicates that interest in acquiring dealerships remains high, with nearly 80% of respondents expressing interest in buying stores in the next 12 months. The report also ranks the desirability of owning dealerships representing specific brands, with Japanese and German luxury brands topping the list.

The Presidio Group's Q3 2023 Auto Retail Report sheds light on the pivotal role that technology is playing, offering a glimpse into how it is reshaping the sector:

  • Leveraging Technology for Expansion: According to a survey conducted by The Presidio Group, technology is a key motivator for U.S. dealers looking to expand their operations through acquisitions. Large acquisitive groups that harness advanced technologies across their dealerships are poised to achieve a higher return on sales, making their acquisitions more accretive. This trend is expected to accelerate dealership consolidation and provide a competitive edge to technology-savvy acquirers.
  • Scaling through Technology: 32% of respondents expressed a central motivation for acquiring dealerships in the coming year: to build scale and leverage their technology investments and resources. This strategic approach highlights the growing importance of technology in enhancing the efficiency and competitiveness of dealerships.
  • Targeted Areas of Disruption: The areas where technology is making a significant impact are clear. Artificial intelligence, vehicle logistics, consumer data, and the evolving retail model are at the forefront of disruption. Strategic capital, venture capital, and private equity are expected to play crucial roles in driving innovation and providing the industry with the tools needed to thrive in this evolving landscape.
“The automotive landscape is ripe for change – and all of it driven by tech. There’s no going back, and there’s never a better time to play in the space.” - Ernie Garcia, CEO of Carvana

AutoTrainer's Role in the Changing Landscape

As the automotive retail landscape undergoes significant technology transformations, AI solutions like AutoTrainer are playing a crucial role. Here's how AutoTrainer fits into this evolving ecosystem:

  1. Compliance and Transparency: AutoTrainer's compliance solutions ensure that dealerships adhere to evolving regulations, including the FTC's CARS Rule. By obtaining express, informed consent for charges and recording transactions, AutoTrainer enhances transparency and accountability, aligning with the industry's shift toward fairness and consumer protection.
  2. Efficiency and Customer Trust: AutoTrainer streamlines the F&I process and adds consistency, saving time for dealerships and customers. This efficiency builds trust and confidence in the sales process, even during challenging market conditions.
  3. Adapting to Change: In a rapidly changing industry, AutoTrainer's technology helps dealerships adapt to new F&I processes efficiently. As technology becomes increasingly critical for success, dealerships can leverage AutoTrainer's solutions to navigate these changes effectively.

In a landscape where technology and compliance are paramount, AutoTrainer stands as a valuable partner for dealerships seeking to thrive in the evolving auto retail sector. As the industry continues to transform, solutions like AutoTrainer are essential in maintaining compliance, ensuring transparency, and building trust.

The future of auto retail may be marked by uncertainty, but with the right technology partners, dealerships can navigate these changes successfully and grow profits while providing exceptional service to customers.