Welcome back to the latest episode of The Future of Automotive on CBT News, where we put recent automotive and mobility news into the context of the broader themes impacting the industry.
I’m Steve Greenfield from Automotive Ventures, and I’m glad that you could join us.
Coming off last week’s New York Auto Forum, J.D. Power reported that 2024 dealer profits were projected to be about $26 billion.
That’s down over 50% in just two years, but still almost 50% higher than before the COVID-19 pandemic.
J.D. Power reported that short of another global production disruption, the $55 billion in annual dealer profits achieved in 2022 (when new-vehicle inventories were at their lowest is a level) is unlikely to be seen in the foreseeable future. The reasons? Dealer competition, manufacturing overcapacity, the uncertainty about EV adoption, and fluctuating consumer demand.
J.D. Power reported that dealer margins, got as high as 7% when retail inventories were under 1 million vehicles and dealer advertising spend as a percentage of sticker price was just over 2%.
As inventories grew — J.D. Power estimates retail inventories are now at about 1.7 million vehicles — dealer ad spend rose accordingly, from 2% to 5.2% and are still rising. Meanwhile, margins shrank from almost 7% down to 3.2%, and appear to continue to head downward.
Shifting gears, The Presidio Group’s latest Quarterly Outlook publication is out, and is definitely worth checking out. Presidio is now partnering with NCM Associates, and the quality and depth of the data in their quarterly publication is frankly amazing.
The new Presidio report shows that franchised dealers experienced a 20.4% drop in profits in 2023 vs. the previous year.
Even with 2023’s significant earnings drop, the average dealership net pretax profit in 2023 was still more than 2.5 times that of pre-COVID 2018.
With new car inventories mounting and front end gross margins getting squeezed, I think we’ll continue to see dealership profit margins drifting back to something closer to pre-COVID levels over the remainder of this year.
Companies to watch
So, with that, let’s transition to Our Companies to Watch.
Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my weekly Intel Report, we showcase a company to watch, and take the opportunity here to share that company with you.
PHINXT Robotics
Today, our new company to watch is PHINXT Robotics.
PHINXT Robotics enables warehouses of any size to deploy autonomous robots as needed, with no expertise required.
PHINXT builds simulations of your warehouse so that you can immediately see the efficiency gains from introducing their robots.
Whether you’re just starting to introduce automation into your warehouse, or you want to grow your current robotic fleet, PHINXT can add robots as you need them.
Leveraging the combined power of cloud and edge computing means that PHINXT has the lowest infrastructure and setup requirements to automate your warehouse. This reduces upfront and ongoing costs for you and means that their system is both fast to deploy and flexible to upgrade.
If you’d like to learn more about PHINXT Robotics, you can check them out at www.phinxt.com.
So that’s it for this week’s Future of Automotive segment.
If you’re an AutoTech entrepreneur working on a solution that helps car dealerships, we want to hear from you. We are actively investing out of our DealerFund.
If you’re interested in joining our Investment Club to make direct investments into AutoTech and Mobility startups, please join. There is no obligation to start seeing our deal flow, and we continue to have attractive investment deals available to our members.
Don’t forget to check out my book, “The Future of Automotive Retail,” which is available on Amazon.com. And keep an eye out for my new book, “The Future of Mobility”, which is almost done, and will be out soon.
Thanks (as always) for your ongoing support and for tuning into CBT News for this week’s Future of Automotive segment. We’ll see you next week!
