Mercer sees evolution, not revolution, for future of dealerships

Forecaster Glenn Mercer sees many changes coming to the auto sales landscape in the U.S., but no significant disruption to the dealership business model. He spoke at a WANADA event at the Trump International Hotel in D.C. last week, sponsored by WANADA Kindred line members Porter Construction and Architects Group Practice.

Unlike some forecasters, Mercer expects evolution not revolution. Franchised dealerships will remain the main venue for auto sales, but OEMs will tighten their control of dealerships, he said.

“Dealerships will continue to move from entrepreneurial, diverse traders to OEM-controlled, standardized retailers,” Mercer told the crowd of dealers. Dealers will get over 90 percent market share of sales versus direct sales from the automakers.

The number of dealerships will drop from 18,000 today to 16,500 by 2025, Mercer predicted. Additionally, the number of owners will decrease from 8,000 to 6,500.

Mercer noted, too, that individual ownership of dealerships will remain dominant, pointing out that the Big 6 public chains have not expanded in the past 10 years.

Regarding dealership profit, Mercer said it will decline and depend more on service, as has already started to happen.

Mercer concluded by referencing some trends in overall automotive retail:

  • Dealers will continue to see 17 to 18 million new vehicle sales every year through 2025, propelled by a growing population and increasing sub-urbanization.
  • Although it is clear millennials are now buying cars, the average age of the new-car buyer is older at 54, and 43 for used cars. Transaction prices are going up, driven by the increase in SUV share.

The biggest threat to this evolution, Mercer said, is the unlikely prospect that mobility services and autonomous vehicles combine. That would dramatically reduce the need to own a car.

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