The risk to dealerships grows after 2025 as competition intensifies and new technologies have more time to trigger challenges for the franchise system, Mercer said.
Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, urges dealers to look at some of the developments as opportunities.
"Car sharing and ride sharing are networks that dealers could provision," Appleton said. "In New Jersey, I could see dealer-branded car sharing and ride sharing programs operating in densely populated parts of the state."
Single-point dealerships and smaller groups are more vulnerable in the years ahead. Mercer predicts that the number of U.S. dealerships will drop from just under 18,000 stores today to around 16,500 in 2025. And the pool of dealership owners will drop from 8,000 today to 6,500 in that same timeframe. Capital investment and training needs will increase, and the operations requirements will become ever more complex.
"It seems like every day I've got somebody calling me up saying it's no fun anymore," Welch said. "The factory programs are too rigorous, and the only way you can make money is on these manufacturer incentive programs, stair-step programs and others."
John McEleney, NADA chairman in 2009, called it a wrap in 2016, his family's 102nd year in the business.
After having as many as six dealerships, McEleney was down to one store in Clinton, Iowa, that he ran with his son. The dealership performed well, but when a bigger retailer approached the father-son pair about selling, the deal made sense, said McEleney. The challenges facing franchised dealers were part of the decision-making, he said.
"It's clear that consolidation is coming," McEleney said. "We were in a midsize market, and we had good franchises. Our facilities were current. We had a lot of things going for us, but looking down the road, you either have to acquire or be acquired."
McEleney, who turned 65 in October, was reaching retirement age. Son Drew, now age 36 and with a young family, decided against becoming the acquirer. So in July, the McEleneys sold their store to Billion Automotive, which bills itself as family owned and "one of the nation's largest automotive websites." Drew McEleney now works for Cox Automotive.