There’s lots of opportunity, but it will require hard work and fresh approaches
In 2023, I wrote an article called, Staying alive until 2025. At the time I wrote that article, things were unsteady on the back of both COVID and the computer chip shortage.
As I look ahead to the balance of 2025 and into 2026, with the emerging geopolitical uncertainties that surround our businesses and personal lives, particularly our all-of-a sudden fractured relationship with the new United States administration, I wonder how the new normal will be determined.
The premise of the 2023 article was based on a news interview I listened to, where the interviewee was asked when the economy would return to normal. We are entering a difficult period for the automotive industry and as a result for the retail automotive dealer.
Consumers and small businesses alike will be challenged as input costs will increase faster than wages and net revenues. Gross margin pools could shrink because of those escalating input costs and a real reduction in gross sales activity. Gross profit declining and expenses increasing is not a sustainable formula for success.
Domestically in Canada, the political uncertainties reach from coast to coast. With a federal election in the coming months and with some premiers resigning from their posts, we are putting a Team Canada on the ice with a very short bench. There are some very good people in the wings, waiting to be empowered. They will be assuming their various roles over the coming months, but until then, we are at a significant disadvantage because of the lead that the current U.S. administration holds in putting their team together.
As dealers, although we need to monitor the political world, we cannot do much about it. We can make some short-term decisions that will benefit our customers, our people, and our businesses, but we will not be able to fully defend ourselves effectively.
So, as dealers, what are we supposed to do? At times like this, logic and common sense are the correct course of action. It’s been said that you can’t control the uncontrollable. What you can do is work with your team and deal with the facts that you have and make the best collective decisions you can. It’s not time to get fancy but rather it’s time to stick to your knitting and operate within your capability to produce excellence.
We are all consumers, and as such, we don’t behave much differently than everybody else except when it comes to buying cars, which very few of us do.
It’s been said that you can’t control the uncontrollable. What you can do is work with your team and deal with the facts that you have and make the best collective decisions you can.
Certain logical assumptions can be made. In looking at your own behaviours, and those of your team, you will, in effect, be putting yourself in the same position as your customers. We know vehicle affordability is a huge issue. It has been for a few years, is currently escalating and will continue to be an issue for your customers.
Vehicle affordability has a few tails. Firstly, it will be the tendency of many consumers to delay the purchase of their next vehicle.
Secondly, many consumers will not have the luxury to delay their decision to their next vehicle acquisition. They will be pushed into the market at a time not overly convenient for them. For this group, the affordability issue may mean not buying a new vehicle but rather buying a used vehicle.
Thirdly, for others, it may mean trading in their older used vehicle for a newer used vehicle.
Fourthly, it may also mean extending their amortization period for their acquisition to reduce their monthly payments.
Vehicle affordability may very well shift customers from ownership to leasing, especially if they face uncertain future monthly payments. Every dollar saved will matter.
SUVs are still very popular, especially mid-size SUVs. Investing in the right types of vehicles on your lot may very well be the differentiator between a customer purchasing from you or somewhere else.
I recommend that you look at your vehicle on the road data and determine from the full mix of brands, which ones are more popular in your market. It may be that historically you invested in used vehicles of your own brand.
That is all well and good and a very good strategy in normal times. Your brand, however, only has a minimum market share compared to the overall vehicle on the road market share in your market.
Investing in certain high-demand vehicles of other brands may very well produce increased used vehicle activity for your dealership. Vehicle quality is very important to consumers.
Your historical customer base is a good start. They have done business with you before and there should be no reason why they will not again.
Brand loyalty is not what it used to be in many markets. Investing in high-quality used vehicles of competitive brands in addition to your own brand may be a helpful strategy to get through these more challenging times. And don’t forget the benefit of reconditioning costs to your parts and service departments.
Historically, there is a 5-year itch for many customers. So, the 2019-2020 models may be good trade-in candidates, many of which still have lots of kilometres left in them and could be sound retail pieces for your dealership.
Look for the low-hanging fruit. Your historical customer base is a good start. They have done business with you before and there should be no reason why they will not again.
Troll your service customer database to identify potential customers for service. Reach out to them and see if you can generate a few extra customer-pay or warranty hours a day. Focus on tires, brakes, shocks, etc., that can generate good CP Labour and Parts revenue.
An important thing to remember is that many of our team members were spoiled during the COVID and chip shortages. They became order takers in our retail and fixed-operations businesses. Many will find it challenging to ask for sales in retail operations and work order sales in fixed operations. However, this must be done to be successful. I am not saying oversell beyond what is required. I am, however, saying that making sure the customers’ vehicles remain on the road, uninterrupted to meet their needs reliably.
So, what will the months ahead bring? A new discipline to ask for the business. Your teams will need to work harder than they ever have to capture the available work in your market. There are lots of opportunities out there, you just must go and find them. All dealerships have low-hanging fruit. It’s there for the taking.
