With 2023 in the rearview mirror, it is time for car dealers to review the automotive landscape so they can enter the New Year with confidence in their strategies and ability to grow.
On this episode of Inside Automotive, host Jim Fitzpatrick is joined by Jonathan Smoke, chief economist at Cox Automotive. Smoke is one of the automotive industry’s leading analysts, with an impressive track record of providing accurate forecasts and helpful insights for car dealers. Now, he shares his retrospective of the 2023 automotive landscape and his predictions for the 2024 market.
Key Takeaways
1. Smoke notes that dealers not only successfully navigated a complicated automotive landscape in 2023 but also achieved their third most profitable year on record. The market avoided a recession, and supply chain issues were largely resolved. Most importantly, manufacturers loosened control on inventories and brought back incentives, boosting demand in the car market.
2. Although it seemed like the year was ending with negative momentum, Smoke emphasizes that this was actually result of normalization and a return to pre-pandemic standards across the automotive landscape rather than a slowdown in demand. That being said, dealers are still well ahead in terms of profitability than they were in 2019.
3. While retailers may have enjoyed the abnormal profitability of the last few years, Smoke notes that this was not sustainable for consumers. In 2024, the automotive landscape will see the return of sustainability, which is better not just for buyers but also for the long-term success of car dealers.
4. In Cox Automotive’s Q4 dealer sentiment survey, profitability was the key reason for pessimistic attitudes. In 2024, Smoke believes confidence in the automotive landscape will return as the market grows more stable, even if car dealer earnings are less than they were during the pandemic.
5. Smoke notes that 2024 will be another challenging year for the retail automotive sector, but it will be far from the worst. Dealers should expect to see five trends in the New Year:
- Growth will continue to slow, but the economy will avoid a recession. Dealers will likely see sales increase by 2%.
- Inventory levels will continue to rise, and dealers will continue to see consumer-friendly prices return.
- The seller’s market is now over. Dealers will need to re-adopt aggressive marketing strategies, improve customer service, and compete with other storefronts on pricing.
- The electric vehicle market will continue to grow, and new battery-powered models will continue to arrive, but dealers and manufacturers will need to aggressively pursue incentives, discounts, advertising, and sales in the zero-emission market to spur adoption.
- The automotive landscape will see a return to normalcy. While this benefits buyers more than sellers, it still works to the long-term advantage of car dealers by ensuring years of profitable and sustainable growth
"I don't think the total volumes will be the same [in 2024], but I would go out on a limb and say my bet is that, for the best dealers out there, it will be their fourth most profitable year in history." — Jonathan Smoke
