Canadian dealership leaders forecast the most significant challenges ahead
There is one constant in the automotive industry: change. Current geopolitical challenges and mandates aside, automotive retail is constantly evolving, and is impacted by many factors.
Real estate, technology, changing demographics and government regulations, digitization, customer expectations and the quest for talent are but a few of the challenges dealerships face every day.
We may not have a crystal ball that lets us see the future of automotive retail, but we can gain valuable insights from the people that live and breathe it every day.
The Canadian Automobile Dealer Association (CADA) commissioned a forward-looking study with Clarify Group among Canada’s most senior auto retail leaders. The Road Ahead: Voice of the Canadian Dealer Study gathered feedback from 422 dealer principals and other equity-participating retail leaders in December 2024 in a confidential survey.
Covering dealers from coast to coast to coast, across urban, suburban and rural stores; across volume and luxury brand dealers, across single- and multi-point dealer groups, the mission was to identify emerging trends and gauge dealer sentiment regarding how they are expected to develop over the next decade.
We identified six key trends. Below you will find the key takeaways from three of those trends, as well as the implications for the future of automotive retail.
Evolution of Retail Operations
There is no question that retail operations will be re-shaped by digital and artificial intelligence (AI) tools. More than three-in-five dealers (62 per cent) expect AI to have a major or radical impact on their business in the future. The challenge is that less than one-in-three retailers (31 per cent) currently feel well prepared to integrate AI tools into their business.
The implications for dealers? Before rushing into AI investments, take the time to educate yourself. Talk to your tech partners. Be clear on why and how you expect AI to benefit the business.
Changing Profitability Drivers
The vast majority of Canadian dealers (80 per cent) predict that fixed operations will be the most significant contributor to overall profitability over the next decade, ahead of Used Vehicle Sales (61 per cent), New Vehicle Sales (60 per cent) and F&I (49 per cent).
Two-thirds of dealers (65 per cent) agree or strongly agree with the notion that electric vehicles will negatively impact profitability over the next decade.
The implications for dealers? The transition to electric demands dealer entrepreneurship to develop new sources of revenue. Dealers must do what they have always done: adapt and innovate.
In the survey, dealers identified three broad opportunities to create and sustain new revenue streams:
- Vehicle Services: including battery health inspections and preventative maintenance for consumables like fluids, tires and brakes;
- New Services: including public charging stations and the sale and installation of home chargers; and
- Vehicle Protection and Personalization Services: including extended warranties, protection packages, accessories, ceramic coating, vinyl wraps, and other personalization items.
The Changing Consumer
The vast majority of dealers (89 per cent) predict that Canadians will expect a more personalized experience from their retailer—the sales and service experiences are becoming at least as important as the product itself. Customers are spoiled for choice and brand loyalty continues to decrease.
As vehicles become more automated and technologically advanced, nearly 3 in 5 dealers (58 per cent) agree or strongly agree that customers will require more advice and guidance than today. They are looking for a knowledgeable, trusted advisor.
As we look to the future, we see that the way consumers buy and interact with brands will be more dependent on emotional connection. They expect a personalized experience and want to support brands they identify with. They have high expectations and hold brands accountable.
The implications for dealers? We will need to shift from merely reacting to situations to anticipating them in order to meet, let alone exceed, their expectations. Leveraging CRM to deliver a personalized, “know me” experience is becoming a core competency for dealers.
Despite these challenges, Canadian dealers remain optimistic. Nearly two-thirds of respondents (64 per cent) expect their business to grow over the coming decade (only 16 per cent expect their business to be smaller).
The entrepreneurial spirit of Canadian dealers may best be demonstrated with this final data point: when asked their level of confidence that the auto retail industry will be in a positive place by 2035, they responded with a 6.3 confidence rating on a 10-point scale.
When asked about their confidence for their own business, the score increased to 7.1. Dealer entrepreneurship and the desire to remain agile in the face of changing market dynamics is alive and well.
We will revisit the remaining three trends gathered from the study in a future column.
