As the automotive industry continues to evolve, the year 2024 promises to be a pivotal one marked by dynamic shifts in automotive retailing. From advancements in technology to changing consumer preferences, the landscape of automotive retail is poised for further transformation. In this ever-evolving environment, staying aware of the latest trends is crucial for automotive retailing professionals seeking to navigate the challenges and seize new opportunities. Here are six key automotive retailing trends that are set to shape the industry throughout 2024.
Electric Vehicle Expansion and Potential Global Tensions
Electric vehicles (EVs) have garnered a lot of attention throughout the past few years and this is not expected to change in 2024. The Economist Group’s latest assessment from its Economist Intelligence Unit (EIU) indicates sales of EVs will rise by 21% and total just shy of 15 million units over the year. More than 50% of these, however, will be sold in China and EIU’s report warns that “the Chinese government’s support for the sector will prompt trade tensions.”
Purchase subsidies are a prominent driver in EV expansion, but many countries outside China such as the United States and the United Kingdom have various regulations regarding batteries and other materials that may be too difficult to meet, conceivably hindering the availability of subsidies. Potentially fueling global tensions more, the European Commission opened its so-called electric vehicle probe in October, which is an investigation into allegations of illegal subsidization on imported EVs from China. The outcome of this investigation could change China’s relationship with other countries and therefore cause either an improvement or a decline in the success of EV adoption.
Overall, despite a rise in interested consumers, it is important to note that EV adoption is advancing much slower than anticipated – especially in the U.S. – and various automakers have canceled major EV development and production plans they had for the coming years.
Emphasis on Faster and Better Charging
Of course, a major hindrance in the adoption of EVs worldwide has been the time it takes to charge an EV battery and, thus far, dealers have had a hard time changing consumers’ minds about this challenge. For 2024, more auto companies may adapt to Tesla’s North American Charging Standard (NACS), especially throughout North America. Major automotive companies such as Ford, General Motors, Mercedes-Benz, Nissan, Volvo, and Honda are set to provide drivers with access to Tesla’s Supercharger Network, and they are also planning on collaborating to establish a network of fast-charging stations supporting both Combined Charging System (CCS) and NACS connectors. Expanding access to faster charging should theoretically make it easier for dealers to sell EVs as consumers won’t have the same level of anxiety about charge times.
In addition, the EV industry is expected to witness the introduction of new battery technologies that will improve driving range, reduce charge time, cut costs, and enhance safety. Several automotive companies such as Tesla are also making strategic investments, entering long-term supply agreements, and emphasizing recycling to ensure a continuous and sustainable supply of battery materials.
Increased Demand for Hybrid Vehicles
EV sales will likely increase slowly over the coming years as automakers develop more efficient and cost-effective EVs, but 2024 may see a large uptick in the demand for hybrid vehicles. Pat Ryan, the CEO of car shopping platform CoPilot, told Forbes, “They’ve gotten the cost to be more manageable in [hybrids], so areas where the people are still getting comfortable with electric vehicles, cost, range, charging—those are all issues that don’t exist in anywhere near the same way with hybrids, so the hybrid market is actually the white hot market right now.” Many hybrid vehicles are eligible for federal tax credits and most U.S. states offer various incentives as well, thus increasing consumer interest in them.
Impact of the United Auto Workers Strike
The United Auto Workers (UAW) went on strike in the Fall of 2023 due to the failure to come to an agreed labor contract with Ford, General Motors, and Stellantis. After a six-week strike, workers were successful in getting higher wages, more overtime and retirement benefits, and increased protections against the closure of manufacturing plants. While there are only about 140,000 UAW workers in the U.S., Cox Automotive reported that Ford’s Chief Financial Officer, John Lawler, predicts that wage increases alone could increase the price of vehicles by a staggering $900 each. Other automakers such as Honda and Toyota have already announced wage increases for their workers as well. Ultimately, the rising cost of labor is expected to increase the prices of vehicles, thus reducing affordability and hindering consumers’ ability to buy cars.
Continuing Impact of High Interest Rates
High interest rates have impacted dealers greatly in recent months and the trend is expected to continue into 2024. Cox Automotive’s recent Dealers Sentiment Index Survey found that an astonishing 65% of dealers note that interest rates and the economy are currently the main hindrances to their businesses. Some dealers reported needing to reject monthly vehicle allocations, which would have been an inconceivable decision just one year ago.
Of course, high interest rates are greatly impacting consumers, as the average interest rate for a new car is hovering around 9% – quite a hike from 5.5% two years ago. The high average cost of a new vehicle coupled with the high interest rates often puts consumers out of the new car market completely. In addition, offering steeply lower interest rates (including 0% offers on select models) puts OEMs in a bind as well and may continue to put pressure on their profit margins.
Improved Inventory Metrics and a Reduction in Prices
The pandemic dramatically changed the automotive market, as inventory levels plummeted due to global pauses in production and prices drastically rose. Inventory levels are increasing now as supply chains continue to normalize, meaning more options for consumers and less inventory-induced stress on dealers. Prices are indisputably still much higher than they were before the pandemic but CarEdge reports that average prices of both new and used vehicles are slightly falling while dealers are starting to be able to offer more incentives again. Dealers had very little wiggle room throughout the pandemic but are now more willing to negotiate with their customers to provide them with better deals while still making solid profits, and this trend is expected to continue in 2024.
Overall, in 2024 the auto industry is expected to see some of the same obstacles it has throughout 2023 such as high interest rates and a lagging interest in EVs. However, prices of both new and used vehicles are beginning to drop as inventory improves and OEMs are expected to continue working to make their EVs more affordable to consumers as well. As always, dealers should stay knowledgeable about the ever-changing environment within the industry to adapt accordingly throughout the next year.
