Auto Dealership Industry Overview

Published: February 18, 2025
Last Updated: February 18, 2025
An automotive dealer saleswoman in a navy blazer shows a young couple information inside a booklet while standing in front of a white SUV.

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Key Takeaways 

  • The auto dealership industry is heavily impacted by broader external factors.
  • Automotive sales and inventories are slow to recover from the Covid-19 pandemic and supply chain shortages.
  • Digital technology and EV vehicle mandates offer both opportunities and challenges for auto dealership owners. 

Industry Performance Snapshot 

  • Vehicle sales have not fully recovered to pre-Covid19 levels, but have increased since the initial drop in 2020 (OICA, 2024). 

  • As a result of Covid-19 disruptions, the used car market has overtaken the new car market in terms of total revenue. In 2024, used vehicles made up 42.3% of total industry revenue while new vehicles made up 39.7% (Jowkowski, 2024b). 


Industry Outlook

  • External economic factors including consumer interest rates (First Research Industry Profiles, 2024) and tariffs on imports and exports may negatively impact auto dealerships by increasing the cost of goods and lowering consumer spending (Hudes, 2024; Wolff, 2024).

  • Global car and automobile sales are expected to slowly increase by a rate of 2.1-2.7% over the next five year period (Jowkowski, 2024a). 

Business Locations 

  • Dealership Concentration: 
    • The global auto dealership market is highly fragmented due to its localized nature (First Research Industry Profiles, 2024). 
    • Areas with high population density and economic activity are ideal for new and used car dealerships, making British Columbia a promising location for business owners. Currently, the province contains 7.9% of used car dealerships (Jozkowski, 2024c)  and 13.6% of new car dealerships in Canada (Jozkowski, 2024b). 
  • E-Commerce:

    • Online sales and dealer management platforms offer new ways to interact with customers (Balakrishnan, 2021; “Dealer management system,” 2023 ) but require brick-and-mortar car dealers to compete with new business practices (Jozkowski, 2024c) and more private sellers on digital marketplaces (First Research Industry Profiles, 2024)

    • U.S. car dealers report that digital advertising is playing a strong role in connecting buyers to dealerships (Cars Commerce, 2024) with social media and search engines having high return on investment (Pure Cars, 2022). 
    • Increased reliance on technological systems creates new areas of concern for dealerships, particularly around cybersecurity. A large ransomware attack seriously impacted business across 15,000 dealerships in Canada and the U.S. in 2024 (Sevilla, 2024).
  • United States/Canada Relationship: 
    • Cross-border transportation of new, Canadian-bought vehicles increased 4.3% from 2019 to 2020 as U.S. consumers look to capitalize on strong currency conversion rates (Charinga & Irwin, 2021).
    • U.S. car dealers have looked to purchase Canadian used cars during inventory shortages and supply chain disruptions. However, this practice is threatened by potential tariffs on imports (Irwin & LaForest, 2021). 
    • Alternatively, larger dealerships may look to expand into the U.S. market, as it offers a larger pool of potential customers and individual states may offer enticing tax breaks (Burden & Walsworth, 2022). 

Industry Trends and Challenges 

  • Interest Rates: 
    • “Elevated rates have made financing vehicle purchases more expensive, pushing some lower-income buyers out of the market. (Jozkowski, 2024b)” 
    • Higher interest rates on auto loans cause potential buyers to shift focus from new vehicles to cheaper used vehicles or automotive repairs, which decreases overall revenue for the auto dealership industry (Jozkowski, 2024a). 
  • EV Electrification/ Zero Emission Vehicles: 
    • The Government of Canada (2023) has announced a Zero Emission Vehicle sales target mandate for auto manufacturers to speed up a transition to electric vehicles. In the third quarter of 2024, electric vehicles accounted for 16.5% of new car sales, 3.5% below the first sales goal set for 2026 (Friedman, 2025a). 
    • Automotive industry trade associations have pushed back against the government’s decision to end EV rebates meant to entice buyers into buying electric models (Friedman, 2025a; Friedman, 2025b). Meanwhile, IPSOS (2021) reports most dealers are unprepared to explain the advantages of EVs.. 
  • Supply Chain and Inventory Disruptions:
    • Pandemic supply chain disruptions led to auto part shortages, lowering the availability of new cars. In turn, this increased sales in the used cars industry (Jozkowski,2024b; Jozkowski, 2024c).  
    • After a shortage resulting from lack of trade-ins and increased used car purchases, the used car market’s inventory seems to be stabilizing, leading to price drops in 2024 (Cash, 2024). 

Sources

Wolff, R. (2024, November 27). Trump’s pledged tariffs on imports from Mexico, Canada, and China will lead to more pain for consumers. eMarketer. Retrieved from https://content-na1.emarketer.com/trump-tariffs-mexico-canada-china-imports-consumer-impact 

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