Change is in the air in the U.S. auto market. U.S. auto sales are booming, still running slightly ahead of last year's record pace after dropping a hair in September. But as growth slips and threatens to flip to decline, the ways of success are altering. In a rising market, almost everybody does well. But flat or falling markets separate winners and losers.
Change always creates opportunity. Lots of automakers and dealers have been doing a terrific job of finding and exploiting opportunities this year. But however adaptable companies may be, opportunity isn't uniform.
In sports, experienced teams react quickly to changes. But not every team or every player can adapt equally to different challenges.
Speedy second basemen have more success bunting than plodding catchers. Basketball teams need skilled bigs to score inside and sharpshooters to score outside. Balanced teams are usually better at adapting to changing circumstances.
Similarly, some automakers and dealers are better equipped than others to handle changing environments.
Not every brand, automaker, dealership group and supplier survived the Great Recession. For those who fought their way through the hard times, the U.S. auto market has provided an amazingly long, steady recovery and expansion since 2009.
But this year's auto market is different from last year's.
Last year was a growth market. This is a flat market in vehicles sold, nearly flat on revenue and post peak on profitability.
In an absolute sense it's still a huge market, running above 17 million annual new-vehicle sales.
And this long period of growth -- the longest unbroken string of annual sales gains since the 1920s -- has done wonders to help vehicle retailers and manufacturers rebuild, reinvest and restore reserves.
But the wealth of positive trends that kept the industry growing so long are moderating, running out of steam or even reversing.
Pent-up demand is spent. Almost anybody who delayed buying a vehicle during hard times has bought one by now.
Broadening credit availability after the 2009 clampdown added more buyers for years, but few lenders want to wade deeper into the subprime pool. Record-low interest rates have bottomed out. There's not much room to extend terms of auto loans or expand auto leasing.
Low gasoline prices encourage more big-vehicle sales but can't get much lower, so that's pretty much played out.
And one of the biggest long-term boosts to new-vehicle volume has indeed reversed. Those high resale values caused by a shortage of late-model used vehicles are gone. As used-vehicle prices fall, the more tempting used vehicles become to shoppers.
So in a tougher U.S. market, perhaps with significantly lower new-vehicle volume, which auto companies prosper?
I see most manufacturers preparing for change: experimenting with new markets, developing new channels to resell the approaching wave of returning off-lease vehicles and partnering with shared-ride and autonomous-vehicle startups.
But I'm putting most of my money on franchised dealers. They have always adjusted to rapidly changing markets and are quick at recognizing shifting conditions. Dealers aren't burdened with manufacturers' capital investments in tooling, r&d and long-lived product lines.
Also, unlike with automakers, new-vehicle sales are only part of most dealers' business. Retailers also have used-vehicle sales and service and parts, which typically yield bigger profits than selling new cars and trucks.