Although the U.S. auto dealership sector is working through a period of shrinking margins and flat sales, the mood at the National Automobile Dealers Association Show in January was decidedly upbeat.
The consensus among dealers, speakers and seminar participants seemed clear: The retail dealership model remains the strong foundation of the auto industry — particularly if dealers are responsive to changing consumer preferences and willing to adapt their business processes accordingly.
Comments by industry observers suggested that the annual light-vehicle sales rate is likely to continue a slow decline until 2022, when changing demographics and maturing young buyers begin to reverse the trend.
Despite that, the mood at the convention remained positive, as dealers reflected on many encouraging signs. For example, consumer confidence remains high, gasoline prices are relatively low and interest rates are expected to rise only modestly over the coming year.
Other potentially negative forces — especially continued margin compression and dissatisfaction with manufacturer incentive programs — failed to seriously dim the upbeat outlook.
Rising interest rates are affecting dealer operations and inventory management, and shrinking margins mean dealers must sharpen their focus on controlling expenses.