The Chancellor’s last budget has undoubtedly increased the cost of doing business, putting greater financial pressure on dealers already contending with shifting consumer behaviours, tightening margins, and an evolving technological landscape.
The response to these challenges must be swift and strategic. There is a pressing need to find efficiencies across businesses, and technology can support margins while enhancing the customer experience.
Dealers must embrace technology and accelerate change. Efficiency is the cornerstone of any profitable business. In automotive retail, where costs are escalating, operational streamlining is imperative.
Advances in digital tools, artificial intelligence (AI), and automation allow dealers to modernise workflows, reduce transaction friction, and optimise inventory management.
Many dealer groups have AI on their agendas, and its applications are multifaceted. For example, AI-driven predictive analytics can help dealerships fine-tune stock levels by analysing real-time demand data, ensuring the right vehicles are available at the right time without excess inventory burdening the balance sheet.
Automated customer relationship management (CRM) systems can streamline sales processes, enhancing lead conversion rates while reducing administrative overhead. These are not theoretical advantages but tangible improvements that enable businesses to operate leaner and more profitably.
The automotive industry has traditionally been slow to adopt new technology, often citing concerns that digital solutions might erode the personal relationships that define car sales.
One of the biggest impediments to efficient technology adoption in automotive retail is the persistence of siloed operations.
Sales, aftersales, finance, and marketing teams often work in isolation, leading to inefficiencies and missed opportunities. Dealers who integrate technology holistically across departments will achieve a more seamless, customer-centric experience.
Consider the shift from a ‘customer-supplier’ mindset to a true partnership model within organisations.
By embedding digital solutions across all facets of the dealership—connecting online sales with in-person experiences, integrating finance options at the point of browsing, and leveraging data-driven service reminders—dealerships can increase engagement and drive higher customer lifetime value.
Technology must not be relegated to IT teams but championed across the organisation, with leadership setting the tone for integration and use.
The rise of AI presents both an opportunity and a challenge. Some companies remain hesitant, wary of its implications on their workforce and customer relationships.
In automotive retail, AI can transform customer interactions. Chatbots can handle preliminary customer inquiries, reducing response times and allowing human staff to focus on higher-value interactions.
AI-driven service recommendations can increase after-sales revenue by predicting when a customer will likely require maintenance or upgrades, and providing timely and personalised prompts. Rather than replacing staff, AI is best utilised as a tool that augments human decision-making, allowing teams to work more efficiently and effectively.
There are clear precedents for how industries have transformed through digital adoption.
Retail banking, for example, has shifted from branch-centric models to digital-first interactions, allowing institutions to maintain service levels while reducing operational expenses.
Automotive retail is undergoing a similar transition, and those who hesitate risk obsolescence.
As the automotive industry evolves, dealers must move beyond reactive technology adoption and embrace a strategic, long-term approach. It means investing in staff training to ensure technology is used effectively across all levels of the organisation, prioritising integration to ensure digital tools work seamlessly together rather than creating fragmented experiences, and remaining adaptable by constantly evaluating and refining technology strategies in response to industry shifts.
The automotive sector is at a crossroads. Rising costs necessitate new efficiencies, and technology provides the means to achieve them. However, technology alone will not determine success; it will be shaped by how well dealers integrate these tools into their businesses. Those who recognise technology as a vehicle for empowerment rather than just a tool will be best positioned to navigate the challenges ahead and build sustainable, profitable businesses in the future.
Mike Allen is the managing director of Cambria Private Capital