With 2025 upon us, the automotive industry stands at a crossroads, with opportunities to embrace change and adapt to a shifting landscape. From post-election impacts and vehicle affordability to the EV evolution and consumer satisfaction, here are the trends and predictions that will shape the automotive landscape in 2025 and some ways you can capitalize on them!
Post-Election: Time to Move Forward
With the election season behind us, both franchise and independent dealers can shift gears and focus on growth. Historically, consumer sentiment often improves in the year following an election, and early signs suggest that 2025 could follow this trend. For dealers, this is the time to focus on strategic growth while keeping an eye on key policy changes:
- Economic Health: The early signs are promising, with the economy responding favorably post-election. However, upcoming policy decisions on tariffs, emissions, and EV incentives will play a critical role in shaping the year ahead.
- Tax Policy: By year end, we should have a clearer picture of how tax changes might impact both the industry and consumer spending in 2025 and beyond.
- Consumer Confidence: When optimism rises, so does spending on big-ticket items like vehicles, creating opportunities for dealers to capitalize on the momentum.
Recommended Actions: Know the supply and demand equation in your local market and plan to act on it. Build a plan focused on the future and measure everything. ROI must be your primary focus metric.
Vehicle Affordability: A Continued Focus
Affordability remains a pressing issue for both consumers and dealers. November’s ATP data highlights this ongoing challenge, with new-vehicle prices reaching $48,724 on average in November, the highest of the year. In 2025, we expect to see further shifts for dealerships to address affordability concerns, balancing cost pressures with consumer accessibility:
- Lower Rates, More Options: Credit availability is expanding, offering more consumers viable financing solutions.
- Inventory Stability: Inventory levels are expected to hold steady or even grow, reducing some of the pricing pressure seen in recent years.
- Rising MSRPs: With production costs climbing, manufacturers may continue to raise prices. Dealers will need to balance these increases with creative strategies to maintain consumer interest.
Recommended Actions: Train your teams to speak to rate changes and incentives to educate, build trust and create urgency. Master the process of trade-in valuations and data-based explanation of those values. Provide insurance and peace of mind products by consulting with the needs of every customer top of mind. Fixed Ops is more important than ever.
Market Outlook: A Return to Normalcy
After years of uncertainty driven by supply chain disruptions and shifting consumer behavior, the sales forecast for 2025 shows promise, hinting to a return to traditional market dynamics. This shift provides a foundation for dealers to focus on sustainable growth, while addressing the competitive pressures and evolving consumer expectations that continue to shape the industry:
- New Vehicle Market: Sales are projected to surpass 16 million units for the first time since 2019, driven by improved incentives and inventory levels.
- Used and Wholesale: A strong year for used vehicles and a positive trend in the Manheim Index suggest steady demand, though tight wholesale inventories may continue to pose challenges.
- Margins and Revenue: Continued margin compression will require dealers to lean on data-driven strategies to uncover incremental revenue opportunities and navigate competitive pressures.
Recommended Actions: Drive your market share by creating processes specific to New, Used and CPO. Recognize the importance of omnichannel – meaning allow the shopper to pick up where they left, regardless of where they started or stopped and whether online, in-store or a combination of both. Distance Retailing, Digital Retailing, and eCommerce are all important channels to meet the consumer where they are.
The EV Journey: An Evolving Landscape
Increasing global competition, policy-driven incentives, and advancements in technology are driving EV adoption at a rapid pace. The transition to EVs will remain a defining trend in 2025 as the industry works to meet growing demand and navigate challenges.
- Global Influence: Countries like China are setting benchmarks with policies to encourage EV adoption, such as government-driven incentives. The U.S. market may see increased competition as global automakers enter with affordable, high-quality models.
- Expanded Options: With more EVs and hybrids hitting the market, consumers will have greater variety—but questions around infrastructure and tax incentives remain.
- The Used EV Market: As the EV market matures, more used options will enter the mix, creating opportunities for dealers to connect with eco-conscious buyers.
Recommended Actions: Be an EV champion. Educate your sales team on EVs and get them comfortable with the products. Know your customer—EV adoption is not one size fits all.
Consumer Satisfaction: The Omnichannel Advantage
According to the Cox Automotive Annual Car Buyer Journey Study, consumer satisfaction continues to climb, thanks to a growing focus on seamless, personalized buying experiences and increased inventory. Building trust and delivering exceptional service is key to earning repeat business and turning one-time buyers into loyal advocates. For dealers, maintaining this positive momentum will require blending digital and in-store strategies effectively:
- Digital Empowerment: Consumers appreciate the ability to complete more of the car-buying process online, with tools that empower them to control the deal.
- Personalized Experiences: Dealers are focusing on more than just selling cars—they’re creating lasting relationships with customers by tailoring the experience to individual needs and emphasizing personalized experiences both online and in-store.
Recommended Actions: Be your brand. EMPHASIZE how much every consumer contact matters. Find the deal in every deal. Ask for the business and earn the referrals. Lifetime customer value is the lifeblood of our business.
Final Thoughts
As 2025 unfolds, dealers have a clear opportunity to embrace the new market optimism and reach new customers. The road ahead will require preparation, adaptability, and a focus on building trust at every step of the journey. By embracing change, leveraging data, and keeping the customer at the center of every decision, the automotive industry can look forward to a year of meaningful growth and transformation.
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