In the 22 years since I entered the auto retail business doing acquisitions for AutoNation, dealers have weathered perceived threats from the Internet, public dealer groups and the Great Recession. During that time, average dealership profits have more than doubled, showing the resiliency of the business model.
Dealerships have been like fruit trees that generate healthy profits for owners for decades. But life may be changing for auto dealers. A number of well-respected industry experts are pointing to the future confluence of fully autonomous vehicles and ride-sharing.
These experts predict that retail sales will drop by millions of units per year, which will lead to the demise of thousands of dealerships. In this view, many dealerships are like coal mines: they will produce profits for a limited period of time, and then they will become worthless.
We will leave it to others to predict when autonomous vehicles will be allowed to operate across our country, or if there will be a valid business model to justify their expense. Certainly, untold billions are being invested by OEMs and other companies to develop this technology. The valuations of public dealership companies have been materially hurt by investors' fears for the future. And we see the threat of self-driving vehicles weighing on private valuations, although not as much. A good portion of our client base is selling due to fears of the future — too much of their net worth is tied up in automotive assets that could plummet in value.