Although the 2023 car business is off to a strong start, dealers are anxious to avoid a false sense of security, and want to know what challenges lie in wait. Mike Maroone is the CEO and Chairman of the Mike Maroone Auto Group, and the former President and COO of AutoNation. He has decades of experience in automotive retail, and a passion for helping storeowners find success. On this episode of Inside Automotive, Maroone joins host Jim Fitzpatrick to discuss how last year’s challenges can help dealers prepare for 2023.
Maroone notes that 2022 was one of the most successful years for automotive retail ever seen. Dealers adopted new strategies and better tools in 2022 to maintain their profit margins, and are entering the 2023 car business with a wealth of new knowledge and experience. Despite this spectacular performance, however, automotive retail is still far from healthy.
Many of the problems the COVID pandemic created still exist, and, much like they did in 2022, Maroone predicts they will continue to hold the 2023 car business back. While supply chain disruptions have lessened, vehicles sales are still throttled by limited OEM production. Automaker output also varies significantly between brands, complicating inventory management. Just as they did last year, dealers will need to closely monitor their profit margins and day supply to mitigate the impact of the industry’s unpredictable output.
More: Exploring the impact of EVs on dealers and OEMs at the upcoming 2023 NADA Show
Dealers are also likely to struggle with talent retention in the 2023 car business and beyond. The last three years of vehicle shortages and high demand have allowed sales departments to keep profit margins high with little effort, but as competition ramps up again, commission-based employees are likely to be frustrated. Maroone recommends that storeowners realize that the sales environment is under more pressure than it was in 2022, and to tackle the issue through training and support, giving their staff the tools they need to keep income high even if vehicle values decline. This way, companies can avoid losing their labor.
One of the most pressing issues facing the industry is affordability. 2022 sustained significant increases to the average American’s financial burden. By December, Consumers were not only staggering under the weight of record-breaking vehicle prices, but they were also facing higher monthly auto loan and insurance payments. Used vehicle values also depreciated, cutting customers off from an essential down payment resource, all while incentives steadily disappeared. Combined with inflation and interest rate hikes, the market is incredibly hostile for returning buyers, and both dealers and OEMs will need to work much harder to balance supply and demand than they did last year. However, Maroone notes that relief could still arrive at some point during the 2023 car business. Lower pre-owned car values will eventually work towards the consumer’s advantage, as will re-energized manufacturing. Both factors, however, could take considerable time before making a noticeable difference.
While the 2023 car business promises to bring new challenges, much like last year, there remain many opportunities for dealers to improve their business’s efficiency and the quality of their customer service. Above all, storeowners should avoid lowering their guard. Preparation and adaptability will be key to finding success, but both require patience and attention.
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