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How Tesla, tariffs and market shifts are reshaping car sales
Featuring David Thomas, Director of Content Marketing at CDK Global
Welcome to another edition of the Car Dealership Guy Podcast Recap newsletter.
Recently, I spoke with David Thomas from CDK Global, who breaks down key inventory trends, the growing EV divide, and how dealers are still making money in this uncertain market.
1. There’s no denying the uncertainty now looming over the business, but we’ve been here before.
The state of the industry, with the enactment of tariffs, makes it difficult to plan your day, week, month, or quarter in the business, but the industry has faced tough times before.
“The biggest one that I've experienced was obviously the 2008 recession and automakers going bankrupt.”
Amid all the uncertainty, the auto industry will endure this hurdle. History tells us so.
2. Buyers don’t find much comfort in the idea—‘We’ve been here before.’
When there is uncertainty, consumers are a lot more apprehensive about buying a vehicle, which is now the biggest purchase that many people make because far less are buying homes.
“…Making that type of investment is much harder for them to kind of go forward with.”
Past recession periods reveal a lot about consumer behavior when there’s economic uncertainty.
3. Dealers can continue to maintain some degree of stability in the thick of tariffs.
Retailers need to be leaning into other revenue sources now.
“Anytime that people prolong the purchase process and don't buy a new car sooner, they're going to take care of their existing car. So, dealers do have a…profitable side of the business in terms of fixed ops that they can kind of fall back on in times like this.”
A dealer’s fixed ops strategy is even more important during times like now.
4. Retailers must be prepared to be the bearer of the bad news.
Automakers are typically the ones that bear the brunt of policies like tariffs, deciding how much the additional costs are passed along to the consumer.
“The dealer just has to be the one that, unfortunately, communicates that to the shopper, which doesn't help how people view dealers…but that's how it goes.”
Retailers need to be able to convey to buyers (in a sympathetic way) that the higher pricing decisions are beyond their control.
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5. High inventory is a trend to keep an eye on.
in January, CDK Global reported an Ease of Purchase Study score of 92%—which is indicative of high inventory.
“February actually saw a tiny drop in inventory, at a point, and…in that little blip, the score fell from 92 to 87%. And…the number of people buying in stock went from 56 to 49. It was a clear case of they couldn't find the car they wanted, and they had to find another way to get it.”
CDK Global is starting to see numbers that show inventory is rising again.
6. Hot vehicles are bucking the high inventory trend.
Vehicles like the popular Toyota Rav4 are dealers’ dream vehicles in the market.
“When you have a vehicle like that, that moves volume…It's the best-selling non-truck in the country. And last year…it actually toppled the F-150 on a sales basis to become the most popular vehicle.”
Several Honda models are driving low inventory levels as well.
7. Fleet sales are already being impacted by tariffs.
The CapEx of small businesses planning to spend is way down, given the high level of optimism immediately following the election.
“There's not going to be a business owner out there risking their business and their life…to go buy a new truck…a new work van, when they don't know what's going to happen in the next quarter.”
Major airlines are also predicting a substantial drop in travel, which has a direct impact on car rentals. That means that car rental companies aren't going to be turning over their fleets either.
8. The premium and ultra-luxury segments are driven by different factors.
Vehicles priced at $100,000-plus tend to be less impacted by inventory challenges.
“Those owners pay more attention to when a new model's coming. They…order from the factory a little more often. Even at ($50,000) to $100,000, there is a little more ordering going on.”
EVs (depending on the model and brand) tend to fall in this space as well.
9. Don’t underestimate the growth of the EV market.
Reports suggesting that electric vehicle sales are decreasing are misleading.
“Globally in the U.S., they're not going down. The rate of which they're going up is decreasing. The sales aren't booming, but they're increasing.”
Among franchise dealers (non-Tesla), 82% of EV owners plan to buy another one, according to CDK Global insights. The number is higher for Tesla owners.
10. Tesla’s state in the current market will be studied for decades.
The political dynamics surrounding Tesla and the brand’s CEO, Elon Musk, are unlike anything we’ve seen in the business.
“Elon…built his business selling a vast majority of his vehicles to people of the other political persuasion. That was who was buying the cars, whether it was because it was green or tech. They don't really break down…the political ideology of a buyer, but it was well on the one side of the spectrum…left.”
Musk’s shift to the right is having a huge impact on Tesla’s brand perception in the market, creating a huge opportunity for other car brands.
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