The Expert Podcast

• Overview:
  • What is the future of the car business in 2023 and beyond?
  • The contrast between the robust car business of 2018-2019 and the challenges since the pandemic.
• Past to Present Changes:
  • Pre-pandemic: New car dealerships had ample inventory with great deals.
  • Post-pandemic: Supply chain disruptions led to empty lots and skyrocketing used car prices.
  • 2022: Continued struggles with supply chain issues and limited inventory.
• Current Situation:
  • Manufacturers can now build cars, but not at the pre-pandemic levels.
  • Demand is dropping due to high prices and interest rates:
    • Average new car price: $46,000.
    • Interest rates: 6-7%.
    • Resulting in monthly payments up to $1,000, causing demand destruction.
• Challenges for Manufacturers:
  • Manufacturers face the dilemma of investing in new gasoline vehicle models or switching to electric vehicles (EVs).
  • States enforcing the end of gasoline vehicle sales by 2030, but EV demand is still relatively low.
• Used Car Market Struggles:
  • Large used car dealerships like Carvana, CarMax, and Vroom are facing volume and profitability issues.
  • New car dealers have multiple profit sources (e.g., service, parts) that used car dealers don't.
• Future of Car Dealerships:
  • Potential smaller dealership footprints: less lot space and fewer cars in inventory.
  • Customers may order cars online, reducing the need for large inventories.
  • Carvana’s small footprint and no-haggle pricing model may influence traditional dealerships to adopt similar strategies.
• Fixed Pricing vs. Negotiation:
  • Fixed pricing eliminates the need to haggle, but customers lose the chance for discounts.
  • Discussion on whether fixed pricing is beneficial or limiting for consumers.
• Looking Ahead:
  • Where do you see the car dealership business heading in the coming years?
  • Will demand for vehicles rebound or continue to decrease?