After a challenging and disappointing year, dealerships are anxious to know what’s in store for retail auto in 2023. Consumer research firm J.D. Power is at the forefront of market forecasting and has paid special attention to 2022’s market trends. Tyson Jominy, the company’s Vice President of Data & Analytics, joins Inside Automotive host Jim Fitzpatrick to explain what dealerships should prepare for in the coming months.
One of 2022’s key features was its unpredictability. Major players in the automotive space, such as online used-car retailer Carvana and domineering EV giant Tesla, saw their competitive leads diminish. Automotive executives started the year excited over the possibility of EV sales but quickly became disappointed after increased production failed to win over customers. If dealers do anything to prepare for what 2023 may have in store, Jominy notes, they should expect the unexpected.
While production is still sluggish, supply chain improvements and normalizations in consumer demand have allowed dealerships to slowly rebuild their inventories, an important factor in combatting scarcity and high prices. Although the effect has been modest, the growth has been noticeable. As for what’s in store next year, barring a major global event, Jominy believes auto-retailers will continue to see this trend throughout 2023.
Dealerships had to get creative over the course of 2022. Record-breaking vehicle prices and recession concerns kept many buyers at home. To entice consumers, dealers have offered discounts and promotions on things like financing, insurance, and maintenance. While not discouraging the practice, Jominy does urge dealers to make sure they wait to use certain incentives until they can confirm what 2023 has in store. “You got to have a powder keg you can rely on to affect price changes quickly,” he explains.
“The industry has 3.4 million units of pent-up demand,” notes Jominy. Many dealerships are worried about a recession in the first quarter of 2023, but even if the economy may shrink, consumer interest is unlikely to dissipate. Since 2020, many drivers have put off much-needed vehicle purchases. While they won’t completely protect a business from economic hardship, they will ensure that auto-retailers have a steady flow of in-store customers to sustain their business.
Even though the auto industry has scaled back some of its 2023 expectations, many agree that anything could happen in the coming months. However, many firms, such as J.D. Power, believe that recovery is still possible. Jominy recommends that dealerships focus on customer retention and do what they can to combat price hikes for now, and wait patiently to see what exactly next year has in store. The sacrifices businesses make now will continue to pay off well after the market fully recovers.
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