Steve Greenfield, General Partner at Automotive Ventures and host of CBT News’ Future of Automotive, joined Co-Founders Jim and Bridget Fitzpatrick on CBT Live to look at how AI could reshape the automotive industry over the next five to 10 years.
According to Greenfield, labor makes up about 47% of a dealership’s cost structure, citing NADA data, and that’s where he expects artificial intelligence to drive the biggest profitability gains. He described a phased shift, starting with tools that make existing employees more productive, from technicians billing more hours to salespeople closing more deals per person, before dealers eventually realize they can maintain that output with fewer people and stop backfilling roles as employees turn over.
He said the BDC in particular is likely to seem “archaic” within five years, since artificial intelligence can learn a dealership’s best practices and apply them consistently around the clock. He also expects high-paid, specialized roles like F&I managers to see augmentation rather than replacement, giving less experienced staff real-time coaching that brings their performance closer to a store’s top performers.
Dealer profitability has held between 1.5% and 2.5% net income before tax for the past 50 years, based on data Greenfield credited to Glenn Mercer and NADA, aside from a temporary spike during COVID. Last year’s average landed at 3.3%, and he expects artificial intelligence’s impact on labor and vendor costs to push that figure meaningfully higher.
That kind of sustained margin growth, Greenfield said, will make dealerships a more attractive asset class for buyers and private equity, giving owners more capital to reinvest in employees, acquisitions or real estate as the industry’s cost structure shifts.
