"Disrupters" Lead to Consolidation

Some car dealers are running scared because of “disrupters” in the industry. Carvana, Uber, and new technology like autonomous cars are making some owners feel like it’s time to cash in. But is there a reason to be worried?

Uber, Lyft and other ride sharing services were originally forecasted to put a dent in vehicle sales, but it turns out millennials were just a couple years late to the party because of other debt. Autonomous cars and electric vehicles may change the market, but traditional automakers are making EVs, too, not just Tesla. Carvana may present a new business model, but at the end of the day it’s just a car dealer.

Changing technology, an increase in digital retailing and higher vehicle prices are creating a very different market and a serving a different type of customer than was the case even 10 years ago. This changing dynamic makes some owners feel there is too much risk, so they’re out.

The owners who are walking away leave ample opportunity for younger, ambitious dealer owners who are looking to expand. Expansion may be a new way for dealers to combat reduced car sales. Larger dealer groups are reaping the benefits as they buy up smaller dealers who are ready to exit the market. Cochran Automotive in Pennsylvania increased sales by 31 percent by purchasing three new dealerships last year, proving that consolidation works.

The “get big or get out” mindset is quickly spreading across the nation as more groups buy up smaller dealerships, which ultimately makes it more difficult for other mom-and-pops to compete. If you’re planning to sell in the next 5-10 years watch the market and wait for the right moment. Wait for the right offer.

While there is a shift to this new, consolidated outlook, that doesn’t mean smaller dealers are done for. How can you hunker down? Create a long-term business plan for the next 20+ years. Make sure you have a succession plan in place. Be ready to change with both the technology in vehicles and an ever-changing digital outlook for retail. As the industry evolves, you must also.

You don’t have to be scared. You just have to be prepared. If you’re ready to expand your group, sell your dealership or hunker down, reach out. GW Marketing Services can help.