As we approach the close of 2023, it is imperative for car dealers to assess the automotive landscape and prepare for the upcoming year. Joining host Jim Fitzpatrick on Inside Automotive is Jonathan Smoke, the chief economist at Cox Automotive. Smoke is widely recognized for his accurate forecasts and valuable insights, making him a prominent figure in the automotive industry. In this episode, he offers a retrospective of the 2023 automotive landscape and shares his predictions for the market in 2024.
Throughout 2023, dealers effectively navigated a complex automotive landscape, resulting in their third most profitable year on record. The market successfully avoided a recession, supply chain challenges were largely resolved, and manufacturers eased their control on inventories while reintroducing incentives. As a result, there was a significant increase in demand for cars, contributing to a robust year for dealers.
Contrary to initial appearances, the apparent negative momentum at the end of the year was actually indicative of the industry normalizing and reverting to pre-pandemic standards, rather than a decrease in demand. Of particular note is the fact that dealers are currently in a more profitable position than they were in 2019.
While the abnormal profitability experienced in recent years has been advantageous for retailers, Smoke warns that it was not sustainable for consumers. In 2024, the automotive landscape will transition towards sustainability, which is not only better for buyers but also crucial for the long-term success of car dealers.
A recent Q4 dealer sentiment survey by Cox Automotive unveiled profitability as the primary cause for pessimism. However, Smoke anticipates that confidence will return to the automotive landscape in 2024 as the market stabilizes, even if dealer earnings are not as significant as they were during the pandemic.
Looking forward to 2024, Smoke outlines five trends that dealers can anticipate:
– While growth will continue to decelerate, the economy is projected to avoid a recession, with sales expected to increase by 2%.
– Inventory levels will persist in rising, and dealers can look forward to the return of consumer-friendly prices.
– The seller’s market has concluded, prompting dealers to refocus on aggressive marketing strategies, enhanced customer service, and competitive pricing.
– The electric vehicle market will continue to expand, necessitating dealers and manufacturers to pursue incentives, discounts, and advertising to drive adoption.
– Overall, the automotive landscape will witness a return to normalcy, benefiting buyers and laying the foundation for years of sustainable growth for car dealers.
In conclusion, Smoke predicts that 2024 will present its challenges for the retail automotive sector, but it will not be the worst year. He confidently asserts that for the top dealers, 2024 could potentially be their fourth most profitable year in history.
In summary, dealers should approach 2024 with readiness and adaptability as they navigate a shifting automotive landscape. Armed with the valuable insights provided by Jonathan Smoke, dealers can enter the New Year equipped with the knowledge needed to thrive in an evolving market.
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