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Resilience in the Auto Dealership Market Amid Uncertainty
The auto dealership buy/sell market has shown a remarkable resilience as it navigates the turbulent waters of tariffs and economic uncertainty. Despite experiencing a 15 percent decline in activity during the first quarter of 2025, the overall market fundamentals remain strong, evident through steady earnings and optimistic projections.
Understanding the Decline in Activity
According to the recent Kerrigan Advisors First Quarter 2025 Blue Sky Report, the total number of transactions fell to 94 in Q1, down from 109 in the same timeframe last year. This decline has been largely attributed to uncertainties surrounding the Trump administration’s auto tariffs, which have created apprehension within the dealership sector. Yet, the resilience of dealership earnings has provided a silver lining; average public dealership earnings reached $1.03 million, marking a seven percent year-over-year increase—the first of its kind since 2022.
Optimism for the Future
Despite the transactional slowdown, confidence remains high among industry executives and dealership owners. Kerrigan Advisors projects approximately 400 transactions for the year, anticipating increased activity in the second half, particularly in regions experiencing high growth. Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors, notes, “Economic uncertainty has had some impact on the buy/sell market in the first quarter of 2025, but its fundamentals remain strong... we predict that activity will accelerate in the second half of 2025.” This sentiment is buoyed by a strong flow of single-store sellers and record buyer liquidity, all indicating a healthier market ahead.
Market Dynamics and Tariff Influences
The implications of tariffs have reshaped public dealership strategies, evident in the allocation of resources by dealer groups. Nearly half of the capital for public dealer groups in Q1 was redirected towards stock buybacks rather than acquisitions, with U.S. dealership acquisition spending plummeting from $1.19 billion in 2024 to just $154 million to kick off 2025. While this might seem discouraging, industry experts believe this is a mere short-term shift, not a deterrent of the broader consolidation trend within the automotive market.
The Road Ahead: Consolidation and Revenue Growth
As Kierrigan Advisors points out, the Top 150 dealerships are already responsible for 33 percent of the industry’s revenue, an increase of 10 percent from 2023. This consolidation trend is likely to continue, as single dealerships come up for sale amidst increasing demand. The anticipated influx of private single-store sellers signals that while the market may face challenges, the drive towards consolidation is robust and shows little sign of slowing.
Final Thoughts on Market Resilience
For dealership owners and general managers, understanding these trends is critical. The current landscape presents both challenges and opportunities for growth. As the year unfolds, staying informed about shifting market dynamics will be essential in positioning your dealership for success.
For real-world insights into how to thrive in this evolving landscape, stay tuned for more updates and actionable strategies.
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