• Stop being a LURKER - join our dealer community and get involved. Sign up and start a conversation.

What Do You Predict For 2016?

Eric Miltsch

Smile, it's good for you!
Apr 16, 2009
102
54
First Name
Eric
It's time for my favorite blog post of the year, on DealerRefresh, where I look ahead & offer up some predictions for 2016!

2015 was another incredible year for the automotive business with regards to retail sales, product developments and dealership strategies. (Check out my post from last year to see everyone's nuggets of wisdom:http://www.dealerrefresh.com/4-predictions-car-dealer-perf…/)

I'll share your predictions this year as well - let's see what you're anticipating more, or less of, in 2016.

Here's to a wonderful New Year for everyone!
 
NADA Predicts 17.6 million new car and light truck sales for 2017. That's a lot of vehicles. Meaning many lazy dealers will allowed to be lazy and still sell a fair amount of vehicles. However, the dealers that that are getting their sh&t have an even greater opportunity to increase market share while increasing their opportunities for service rev.

Mobile ad blockers - There was a small wave of these services 2014 early 2015 until they ran into some security issues. Will we see a return in these services as they improve?...especially since they're allowed on iOS9's playground. When and if we do, will it be something to consider?
 
Sales will plateau on weaker demand, with only a slight uptick, if anything. The Fed will be forced to raise rates, which means there will be more pressure on captive financing. We'll see incentives close to pre-2008 levels to try to maintain the sales momentum from the previous two years. These three things combined will put pressure on overly-leveraged OEMs,

Dealer consolidation will continue at an even more torrid pace. Vendors will be forced to consolidate further to offer the required scale to service the larger dealer entities. Larger, vertically integrated vendors, will leverage their data gathering capabilities to strengthen OEM partnerships, filling the chasm between specialty consulting and existing preferred-partners. Traditional venture capital and private equity will be readily available to fuel the retail automotive growth, as tech-startup valuations soften dramatically. The big will get much BIGGER.

Consequently, the small will have to deliver tremendous value. Mom and pop stores will have to create a differentiated experience, or be forgotten. Those who strategically focus on a specific market segment will win big. The small providers on the vendor side will be collecting their last checks. The scale and complexity of today's business will wipe out the "generalist." Those who specialize, and can scale to the necessary level, will soldier on. It's the time in history to eat or be eaten.

Boldest prediction: Despite record sales, FCA goes on life support.
 
The Fed will be forced to raise rates, which means there will be more pressure on captive financing. We'll see incentives close to pre-2008 levels to try to maintain the sales momentum from the previous two years. These three things combined will put pressure on overly-leveraged OEMs,

Dealer consolidation will continue at an even more torrid pace. Vendors will be forced to consolidate further to offer the required scale to service the larger dealer entities. Larger, vertically integrated vendors, will leverage their data gathering capabilities to strengthen OEM partnerships, filling the chasm between specialty consulting and existing preferred-partners. Traditional venture capital and private equity will be readily available to fuel the retail automotive growth, as tech-startup valuations soften dramatically. The big will get much BIGGER.

Consequently, the small will have to deliver tremendous value. Mom and pop stores will have to create a differentiated experience, or be forgotten. Those who strategically focus on a specific market segment will win big.

I took out a few things I didn't fully agree with, but damn Bill.... :iagree:

The force of dealer consolidation has yet to be seen. I think there will only be 3,000 dealers (as in D.P.s) down the road. That is the same number of stores, but with only 3,000 dealer principles. A bad economy could speed this up while a higher SAAR could slow it down (which is what we're seeing now).

Where I'm not 100% in agreement is on your predictions for the vendor side. I think the recent consolidations are slowing innovation. This is creating a period where smaller vendors, who can move faster, are growing. That will eventually force more consolidation as larger players will have to buy the smaller threats' innovation. The larger vendors will continue to work on tightening deals with the larger businesses like the emerging huge dealer groups and OEMs. The big guys will also be concentrated on expanding internationally. But you're absolutely right that the strength of the larger vendors is in being able to provide scale to the rising mega dealer groups and more influential OEM.

As for dealers, vendors, and manufacturers combined, the car business will become a place where the small will struggle to beat the corporation.
 
Last edited:
I took out a few things I didn't fully agree with, but damn Bill.... :iagree:

The force of dealer consolidation has yet to be seen. I think there will only be 3,000 dealers (as in D.P.s) down the road. That is the same number of stores, but with only 3,000 dealer principles. A bad economy could speed this up while a higher SAAR could slow it down (which is what we're seeing now).

Where I'm not 100% in agreement is on your predictions for the vendor side. I think the recent consolidations are slowing innovation. This is creating a period where smaller vendors, who can move faster, are growing. That will eventually force more consolidation as larger players will have to buy the smaller threats' innovation. The larger vendors will continue to work on tightening deals with the larger businesses like the emerging huge dealer groups and OEMs. The big guys will also be concentrated on expanding internationally. But you're absolutely right that the strength of the larger vendors is in being able to provide scale to the rising mega dealer groups and more influential OEM.

As for dealers, vendors, and manufacturers combined, the car business will become a place where the small will struggle to beat the corporation.

These are predictions, not science, Alex :D

Berkshire is still on the hunt for larger (top 25) groups, and I'm betting that George Soros gets into a serious pissing contest with Buffett in 2016. They have the capital to play with (Lithia and Group 1 have a combined market cap of only $5B), and this will only spur Penske and AutoNation to get bigger.

I totally agree that the smaller players are driving innovation. The problem is that with SAAR at 16M+, most dealerships are selling a lot of cars. Based on my experience, most dealerships don't start shopping around until things get soft, or they come under a new regime. I'm banking on new regimes.