Two-thirds of automaker executives think a hybrid of automakers and dealers will “own the primary customer relationship and most customer data in five years,” according to the inaugural 2023 Kerrigan OEM Survey.
The results show “that the industry is evolving,” said Erin Kerrigan, managing director of Kerrigan Advisors, a dealership sell-side firm in Incline Village, Nev.
Kerrigan Advisors collected about 115 responses from automaker executives from December through May and plan to make the poll annual, Kerrigan said. “These are individuals that don’t often get surveyed,” she said. “We’re getting a window into their views on what’s going on.”
A majority of automaker executives, 69 percent, expect dealership profits in the next 12 months will decline, while 24 percent expect profits to stay the same and 7 percent expect profits to increase. And almost three-quarters of the surveyed executives think new-car margins will settle somewhere between pre-COVID-19 pandemic and current levels, while 10 percent think margins will return to pre-COVID levels and 16 percent expect higher margins for 2023.
Kerrigan said some responses were more surprising than others.
“What I thought was of interest, in terms of challenges to the [dealership] model, was the fact that only 32 percent thought that the traditional MSRP with no-negotiation pricing model for EVs was going to occur,” Kerrigan told Automotive News. “And the vast majority, or 68 percent, thought it’s either a hybrid of some nonnegotiating and some negotiating and 20 percent thought that EVs will basically be nonnegotiable vehicles.”
The results also show that automaker executives likely consider inventory to be permanently changed in the post-pandemic world: 61 percent “expect the ‘new normal’ for new vehicle days’ supply to settle in at 30 to 60 days, below the pre-COVID average of 60 to 90 days.”
Overall, the survey results showed that automakers expect the “dealer to remain a profitable piece of the auto retail puzzle,” according to the survey.
And for now, according to the survey, that puzzle may not include the agency sales model in the U.S.
With the agency model, used by some brands in the United Kingdom, for example, a manufacturer sets vehicle pricing with dealers receiving a set payment and ensuring good customer service, especially with vehicle deliveries.
Just 22 percent of executives surveyed predict automakers will launch agency models in the U.S. in the next five years, while 35 percent don’t and another 43 percent were unsure.
And the majority of automaker executives — 52 percent — think automaker facility requirements for dealers will remain the same in the next five years, with 32 percent expecting an increase and 16 percent predicting a decrease.