3 crucial automotive industry developments that car dealers need to monitor


Welcome to this episode of The Friday 5 with Steve Greenfield, Founder and CEO of Automotive Ventures, an car technologies advisory organization that assists business people increase funds and optimize the price of their firms.

The information cycle carries on at a torrid rate this yr, and this final 7 days was no exception. It’s unbelievable just how considerably change is coming to the field. If you blink, you may well pass up significant news that potentially impacts the franchise supplier model. 

This 7 days I want to recap 3 necessary news products that came across the wire around the previous week – news that dealers must primarily be focused on monitoring. 

1. Buy/Market exercise

1st up, there is NO indicator that bodily dealership acquire/provide action will gradual down anytime soon. 

Lithia Motors has been the most ravenous of the public acquirers, intending to get to 500 rooftops and $50 billion in earnings prior to they’ve developed out their planned footprint. Lithia’s aggressive tempo of acquisitions has provided a ground for valuations in the marketplace. 

This week, Lithia declared the purchase of 10 dealerships throughout southern Florida and Nevada, which will add $950 million bucks in anticipated annualized income.

So much, the U.S. dealership get-promote market is monitoring at a comparable rate to a history-breaking 2021 previous calendar year was broadly deemed the major year for retail store acquisitions in historical past.

The selection of dealerships that adjusted arms in the 1st quarter of 2022 was equivalent to that of the 1st quarter of 2021.

In parallel, valuations keep on to bounce together at an all-time superior. 

From my viewpoint, valuations will not most likely get much better than they are these days. When purely natural acquirers like Lithia have happy their urge for food and crammed out their prepared footprint, valuations will probably regress toward historical stages. 

High inflation and gas price ranges, reduced purchaser sentiment, rising desire prices, and inventory market declines may perhaps velocity us back again to much more normalized valuations. 

But for now, these document-substantial valuations are remaining used to file-significant profits, primarily attributable to a absence of new-auto supply. Many dealers are getting the chance to translate these excessive revenue into getting more bodily merchants. 

Although the seller principals I communicate with commonly focus on only less than-accomplishing merchants exactly where they can justify paying sky-large valuations utilized to these inflated earnings. I think about some prospective buyers in this present setting will at some point really feel “Buyers Remorse” when valuations inevitably slide back to earth. 

2. Ford finishes lease buyouts for EVs

Up coming up this week is fascinating information from Ford Motor Firm, which announced that they have stopped letting clients in most states to purchase their electric powered automobiles at the conclude of a lease, a plan they say will assist manage EV battery recycling.

For illustration, Ford Credit mentioned buyers who lease an F-150 Lightning, Mustang Mach-E, or E-Transit will have to return the automobile when the deal is up and can then renew their lease with a new car if they opt for.

Though Ford is communicating that this initiative is to aid reclaim the raw inputs into batteries, as selling prices have skyrocketed more than the previous year, I feel there might be other dynamics at participate in. 

We’re going to see a proliferation of new EV versions around the following 18 months, and the OEMs will definitely not be in a position to forecast residual values on all of these motor vehicles correctly. I believe that this will allow for Ford to command residual benefit hazard for new EV designs that may well have unstable pricing at the stop of the term. By controlling the utilised automobile source, Ford can closely check and influence the price tag of made use of pricing.

The two GM (with CarBravo) and Ford (with Blue Benefit) now manage their possess on line used car sites. By managing the off-lease quantity, they can ensure that distinctive, appealing, used automobiles are only offered on their proprietary web pages. 

The Automakers have been observing current applied car dynamics, which includes that most cars are coming again at the finish of lease term with hundreds of bucks of favourable equity. Ford will effectively have a connect with possibility to take part economically in any motor vehicle coming back with good equity in its place of surrendering that gain to the consumer or the supplier. 

It’s also likely that Ford realizes that battery and charging technology will advance so swiftly that they may perhaps want the selection of removing employed EVs from the highway, which may possibly not conduct competitively versus model new models getting offered in the future. 

Preventing the client from remaining equipped to get the device at the end of their phrase does make a lease truly feel a large amount much more like a membership product. 

Let’s feel about broader implications of this go, anticipating that other OEMs will elect to follow the similar path. It will necessarily mean significantly much less off-lease motor vehicles out there to the automakers’ franchise dealer networks and unbiased dealerships.

We’ll be seeing to see which other automakers announce comparable strategies over the coming months. I expect we will see lots of some others comply with Ford’s direct. 

3. FTC cracks down on F&I departments

Previous but not least this week, The Federal Trade Commission has signaled that elevated regulation may possibly be coming to vendor F&I profits. 

This week, the FTC proposed banning finance, insurance policy coverage, and physical automobile add-ons that quote-unquote “provide no benefit” and demand expanded disclosure and consent on these types of optional products and solutions — which include a list of rates online.

The agency is also thinking about cracking down on dealerships’ promotion relevant to the charge of the motor vehicle by itself.

An accompanying information release regularly depicted bodily additions and F&I goods as “junk service fees.” Nevertheless, the four commissioners supporting rules acknowledged in a different statement that “Not all incorporate-ons deliver no worth.”

The FTC’s proposed regulations consist of:

  • Bans on all solutions with no reward. 
  • Putting up a listing of all optional increase-ons and their prices on line. 
  • Bans on misleading pricing advertising and marketing.
  •  Disclosure and declining in composing of the “Cash Price tag without having Optional Increase-ons.” 
  • “Express, Informed Consent” on F&I merchandise and other insert-ons.

Considering the fact that the CFPB was largely “de-fanged” throughout the Trump administration, there has not been a great deal danger of regulators squeezing dealer finance and coverage income. 

We will be maintaining a shut eye on this hottest improvement and if the FTC, or any other governing administration entity, begins encroaching on and threatening dealership earnings facilities. 

I informed you the information cycle was occupied this week.

These challenges ought to be monitored carefully by dealerships and have wide implications for the franchise dealership model and ongoing profitability into the long term. 

Businesses To Look at 

Each 7 days we spotlight fascinating businesses in the automotive know-how place to continue to keep an eye on. If you examine my month to month field Intel Report, I showcase a couple of corporations each individual thirty day period, and we acquire the opportunity here on the Friday 5 to share some of all those businesses every 7 days with you.

Today, we have two organizations to observe: WrenchWay and Axion.


For as extensive as I remember, I have listened to from dealerships that they’ve had issues recruiting and retaining professionals.

WrenchWay is a work-recruitment system for the two specialists and support departments. It is transforming that dynamic by giving techs an insider’s perspective of dealerships’ functions, products, pay back amounts, organization lifestyle and other pertinent info.

WrenchWay accomplishes this with its Best Store system. Dealerships pay out a $150 regular payment to be stated as a Major Store, but the listing is significantly far more in-depth than a usual position-board post. Sellers will have to consist of unique details ahead of posts are acknowledged, which includes shell out amounts for technicians, workplace amenities offered (points like air conditioning and heating), and available devices.

In addition, the posting should contain videos showing what the shop seems like and interviews with technicians and preset ops administration who speak about what it is like to work in their retailers. This unique solution marketplaces the dealership and the option to more than just the task-seeker. 

I really like this firm for the reason that they are attempting to fix one of the most considerable soreness points for dealers’ FixedOps departments – recruiting and retaining technicians. The company was began because a dealership desired enable recruiting, and they desired to carry technologies and system to make their attempts repeatable and scalable. 

You can check out WrenchWay at www.WrenchWay.com.


Axion is an AI system & predictive digital featuring for engineers and QA administration that will allow customers to successfully mine via tons of unstructured facts to derive insights to accelerate car or truck development efficiently. 

Axion’s mission is to empower engineering leaders with the ideal choice intelligence system, to reinforce conclusions to deliver the most effective results.

Ahead-wondering engineering leaders throughout automotive, aerospace, and defense leverage Axion to speed up solution improvement, enrich software setting up & collaboration with suppliers, and enhance quality utilizing Axion’s predictive AI-based mostly digital system. Customers incorporate Boeing and the U.S. Air Force.

I appreciate this company for the reason that they can increase a user’s latest process to incredibly immediately and successfully mine by means of tons of unstructured data to derive insights. Axion delivers crystal clear visibility into the upcoming outcomes of today’s choices and actions. 

Check out Axion at www.AxionRay.com.


So that is your weekly Friday 5, a quick wrap-up of the significant offers in the automotive technologies space above the previous week.

If you are an early-phase automotive technological innovation entrepreneur on the lookout to increase funds, or an entrepreneur who is seeking to make a decision no matter if and when they should raise dollars or offer their business enterprise, I’d like to talk with you.

Thank you for tuning into CBT Information for this week’s Friday 5, and we’ll see you following 7 days!

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