Auto dealers cautiously eye an uncertain year ahead

Dealer sentiment about profitability  — shifting into 2025 — is more pessimistic than in previous years, amid projections that new vehicle sales could reach 16 million units over the next 12 months.

The details: A report by the consulting company Kerrigan Advisors found that while a majority of dealers have a positive outlook on valuation (51%), a rising share of dealers expect valuations to decrease (32%), reflecting similar sentiments about profitability.

• 43% of dealers expect profits to decline in 2025, an increase from last year and the highest level in four years. 

• By contrast, just 14% of those surveyed expect a rise in earnings, which is slightly lower than 2023 dealer sentiment profitability going into 2024. 

Digging in: Among all factors, the Kerrigan Advisors survey revealed that new EVs are seen as the most detrimental to dealer profitability, adding to lingering dealer frustrations at the retail level over the push to sell electric vehicles to car buyers. Dealer sentiments about hybrids and profitability are more positive.

• 68% of respondents in the survey expect electric vehicles to have a negative impact on dealership profitability in 2025. 

• Only 5% of those surveyed expect electric vehicle sales to positively impact dealership profitability over the next 12 months.  

• 73% of respondents project that new hybrid vehicle sales will enhance their 2025 earnings, contributing to dealer profitability. 

According to the survey, nearly half of dealers (48%) believe that OEM facility investments, including those required for EVS, will have a negative impact on their future profits. Only 15% of the respondents expect OEM requirements for real estate and property investments to improve profitability.     

Between the lines: The Kerrigan Advisors 2024 survey also highlights some interesting shifts in brand favorability among dealers, especially when it comes to trust, which is critical to retail and OEM operations.

• Toyota ranked as the number one most trusted OEM by dealers for the second consecutive year, with 83% of respondents reporting a high level of trust in Toyota.

• Ford improved its ranking among dealers by 11 percentage points, going from the least trusted brand in the 2023 survey to the fifth least trusted brand. 

• Stellantis (more specifically Chrysler-Dodge-Jeep-Ram) drew the lowest trust among dealers, with 72% of dealers reporting zero trust in the OEM. 

Bottom line: It’s important to keep in mind that dealer sentiment about the business has been somewhat fluid in recent months, with dealer optimism surging following the 2024 election of President-elect Donald Trump to office. Still, Kerrigan Advisors’ 2024 survey findings are concerning, given that 2025 is poised to be one of the best sales years for new vehicles since 2019. 

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