Automotive Retail

The trends that have defined the automotive retail landscape in the last two years, like the push for EVs, emergence of digital retail models, supply chain shortages and more, will continue to take shape this year. In this blog, we will take a brief look at how the industry’s retail landscape performed in the last two years, and delve into what we can expect this year. 

Recapturing Trends that Defined the Automotive Retail Landscape 

In the last two years, the automotive retail landscape has undergone several disruptions with a focus on digitisation, electrification, and adaptation to evolving consumer needs. One could say that both progress and shortages in the industry have had a ripple effect on partners, vendors and end consumers. We find out how. 

Supply Chain shortages beyond semiconductors  

One of the biggest trends we’ve seen is supply chain shortages, which have resulted not just from global semiconductor shortages, but also from ongoing wars, and steep crude oil price hikes. These constraints have disrupted an entire value chain in many ways. Traditional vehicle production and distribution channels have been hit. Automakers have had to tackle the semiconductor shortage by supplying components for higher-end vehicles as a result of which consumers have had to wait longer to purchase their desired models. In fact, consumers have started turning to alternatives, like retaining their old cars for longer periods or going for second hand cars. This has in turn impacted dealerships, who have been grappling with reduced inventory, and rising demand for used cars (and not new cars). Finally, the non-availability of not just semiconductor components, but also materials like plastic and steel for manufacturing, has led to bankruptcies, resulting in job losses for thousands of workers. 

Rising fuel prices impacting car sales 

A second trend we continue to see is rising fuel prices which have discouraged buyers from making new vehicle purchases and left existing buyers grappling with high ownership costs (and living expenses). This in turn, has also impacted sales at dealerships. 

On the positive side, a trend we’ve seen is an accelerated transition from internal combustion vehicles to electric vehicles (EVs). And, the move to a cleaner, more sustainable transportation system has also led to innovation in sales, service and customer engagement. Dealerships have started embracing  EVs as a crucial part of their future, and they’re focusing on education, infrastructure development, and seamless customer experiences. In other words, there’s a vision to not just sell vehicles but to foster an EV-friendly ecosystem for consumers. 

Digital retail models

Talking about sales of new vehicles, post-Covid, we’ve seen a rise in digital retail business models. A 2021 study revealed that car search queries surged especially among first-time buyers in urban areas. So was there an increase in demand for at-home services and contactless car buying. On the industry front, automakers started embracing an omnichannel approach, connecting digital touchpoints across websites, advertising, CRM systems, and physical dealerships. 

While these were trends that defined automotive retail in the last two years, it’s safe to say that the same trends continue to mushroom and pivot in the current year. Let’s look at what they are. 

What we can expect in automotive retail this year 

Supply chain shortages continue to be a challenge for automakers this year. However, automakers are also reevaluating their supply networks, diversifying suppliers and enhancing resilience. For example, instead of relying on a single supplier, which can be risky, they’re relying on multiple suppliers.  

Risk assessment of suppliers 

Secondly, they are conducting thorough risk assessments of their suppliers, by evaluating factors like financial stability, geographic location, and production capacity to identify risks early, and also develop a joint problem-solving approach. They’re also maintaining buffer stocks (safety inventory) of critical components to bridge supply gaps during disruptions, and also exploring local sourcing options to reduce lead times and transportation risks. 

Consumer drive for EVs and Hybrids 

Rising fuel prices also continue to impact automakers, dealerships, and consumers. But, the rise in prices is also driving consumers to turn to EVs and hybrids. According to reports, the EV industry is likely to achieve a 30-40% y-o-y growth this year, owing to factors like greater mainstream adoption, the introduction of newer EV models, a growing charging infrastructure, and continued Government support. We will also see a rising consumer interest in hybrid models that combine electric and traditional combustion engines. These vehicles offer environmental benefits without the range anxiety associated with fully electric cars. 

Predictive inventory management  

A third trend we’ll see is dealerships focusing on better inventory management. Dealers will come up with more efficient metrics to help reduce costs and enhance customer satisfaction. Price competitiveness will continue to remain essential, and dealers will explore strategies to offer competitive pricing. 

On the downside, labour disputes are likely to significantly affect production and supply chain. In 2023, workers from all three major unionised automakers—Ford Motor Company, General Motors, and Stellantis—participated in the United Auto Workers (UAW) strike. Their demands included better wages, improved compensation for new employees, and the restoration of overtime and retirement benefits. The ongoing worker dissatisfaction, coupled with the industry’s need for skilled technical workers, will pose challenges for attracting and retaining employees. As a result, many automotive companies are likely to increase worker wages within the next 12 months. The strike could likely impact EV manufacturing too, this year. 

High interest rates impacting consumers and manufacturers 

Lastly, high interest rates will continue to impact consumers and manufacturers. Amidst a backdrop of weak global industrial production since late 2022, with supply chain disruptions, automotive production stood out with stellar growth in Europe and the United States. However, this growth remains temporary. For consumers, high interest rates will result in costlier car loans. It will diminish affordability and impact purchase decisions. For manufacturers, transport equipment manufacturing, being capital-intensive, will face vulnerability, because investment for production facilities maintenance and expansion is sensitive to interest rate changes. Having said that, the Federal Reserve’s projected rate cuts in 2024 may mitigate some impact, but the delicate balance between demand and financing remains critical. 

Merit’s Expertise in Data Aggregation & Harvesting for the Global Automotive Sector 

Merit Data and Technology excels in aggregating and harvesting automotive data using AI, ML, and human expertise. Our capabilities include: 

  • Crafting end-to-end data pipelines and scalable data warehouses 
  • Designing compliant governance solutions for seamless integration 
  • Utilising high-volume, high-velocity data tools for nuanced insights 
  • Extracting retail product attributes and audience data 
  • Aggregating industry-specific data points for informed decision-making 

Trusted by leading automotive brands, Merit drives innovation and efficiency by delivering refined, actionable insights.

Key Takeaways 

  1. Supply Chain Shortages: The automotive industry continues to grapple with supply chain shortages, particularly in semiconductors, driven by global issues like wars and crude oil price hikes. Automakers are responding by diversifying suppliers, conducting thorough risk assessments, and maintaining buffer stocks of critical components. 
  1. Rising Fuel Prices: Higher fuel prices are impacting both new vehicle purchases and ownership costs. However, the increase in fuel prices is driving consumers towards electric vehicles (EVs) and hybrids. The EV industry is expected to achieve significant year-on-year growth, supported by mainstream adoption, new models, charging infrastructure, and government support. 
  1. Digital Retail Models: The trend towards digital retail models, accelerated by the COVID-19 pandemic, continues. Automakers are embracing an omnichannel approach, connecting digital touchpoints with physical dealerships. Consumers are showing increased interest in at-home services and contactless car buying. 
  1. Inventory Management: Dealerships are focusing on better inventory management to reduce costs and enhance customer satisfaction. Price competitiveness remains crucial, and dealers are exploring strategies to offer competitive pricing. 
  1. Labour Disputes: Labor disputes, as seen in the 2023 United Auto Workers strike, are a potential challenge for the industry. Workers are demanding better wages and improved benefits, posing a risk to production and supply chain activities. Increased wages may impact EV manufacturing in the current year. 
  1. High Interest Rates: High interest rates pose challenges for both consumers and manufacturers. Consumers face costlier car loans, impacting affordability and purchase decisions. Manufacturers, especially in capital-intensive industries like transport equipment manufacturing, are sensitive to interest rate changes, affecting investment for production facilities. 
  1. Federal Reserve’s Role: The Federal Reserve’s projected rate cuts in 2024 may mitigate some of the impact of high interest rates. However, the delicate balance between demand and financing remains critical for the automotive industry’s overall health.

Related Case Studies

  • 01 /

    A Hybrid Solution for Automotive Data Processing at Scale

    Automotive products needed millions of price points and specification details to be tracked for a large range of vehicles.

  • 02 /

    A Digital Engineering Solution for High Volume Automotive Data Extraction

    Automotive products required help to track millions of price points and specification details for a large range of vehicles.