What’s in store for the automotive industry for 2020? This million-dollar question should be on the minds of everyone, from sales professionals, to Dealer Principal Owners, and manufacturers alike. While it’s nearly impossible to predict the future, we did the next best thing and tapped into one of the brightest minds in Cox Automotive’s Economics and Industry Insights Group, Zo Rahim, for this month’s Leadership Lessons. As a senior analyst at Cox, Zo’s responsibility is to track economic data and metrics to better predict what’s coming next for this industry.
Zo spoke recently in Park City, UT where he addressed attendees of our annual Dealertrack DMS Controller Conference, ELEVATE.
Here are the highlights from Zo’s State of the Industry Keynote. You can watch the full video below.
Macroeconomic Headwinds and Their Impact On The Market
According to Zo, “We’re in the best ten-year period for the auto industry in US history.” However, the industry is not without its challenges. Specifically, Zo explains that emerging challenges in the macroeconomic space are shaping the market. The good news lies in the fact that these challenges come with many opportunities for dealers to focus on what’s next: used vehicle sales, parts, and service are some of the areas of practical focus for dealers.
Watch the presentation here.
“As long as the job market remains hot and consumers feel comfortable about their employment situation today, they’ll continue to spend tomorrow.” – Zo Rahim, Cox Automotive
Strong Used Vehicle Sales
With a historically low unemployment rate (3.7%) and an exceptionally strong labor market, Zo points out that businesses are continuing to invest in job creation and headcount across the country. “As long as the job market remains hot and consumers feel comfortable about their employment situation today, they’ll continue to spend tomorrow.” Zo points out that this fact, when combined with easy access to credit, will continue to support auto sales.
Watch the full presentation.
Dealership Profitability Depends On Fixed Ops, F&I, and Used Car Sales
Margin compression is still a very real issue. But, the used vehicle market has the potential to provide improved margin support. “With the right mix of used vehicles and the right planning, even in a downturn, dealerships can grow profitability, can grow margin, can grow revenue,” Zo explains. But, it goes beyond inventory. As more consumer demand for used vehicles drives demand at your dealership, a trend for keeping vehicles longer (up to ten years) follows. Supporting your buyer with insurance and warranty programs in your F&I department is a profitable value-add to ensure the vehicle lasts as long as consumers want to own it.
Watch the full presentation here.