Top 6 Challenges That Car Dealerships Face Today
Changing consumer habits, economic uncertainty, and rapid digital transformation have reshaped the automotive industry, causing significant dealership challenges. Today, 95% of car shoppers now rely on online resources to gather information—making walk-in dealerships as the initial point of contact increasingly ineffective.
Moreover, rising vehicle prices, supply chain issues, and increasing competition from direct-to-consumer brands add pressure. This is why dealerships must adapt to these shifts to bring in more customers, and get more leads.
In this blog, we’ll discuss six significant challenges facing car dealerships today and provide practical solutions to overcome them. The car-buying experience is changing, and dealerships that embrace change will thrive in this new era.
6 Major Challenges That Car Dealerships Face Today
Below are some of the major challenges that car dealerships face today.
1. Adapting to Digital Transformation
In recent years, one of the most significant shifts in the automotive retail industry has been the rapid adoption of digital technologies. 60% of car buyers are open to purchasing a vehicle entirely online, using websites and apps to browse inventory, compare prices, and schedule test drives. While this shift offers many opportunities, it also presents substantial dealership challenges.
The Challenge
Car dealerships must modernize their approach to accommodate an increasingly digital-first consumer. In the past, dealerships relied heavily on in-person interactions to drive sales. However, in recent years, with the rise of online shopping, many customers prefer to research, compare, and even purchase their vehicles virtually before visiting a dealership.
Solution
To stay competitive, dealerships must invest in a comprehensive digital infrastructure. This includes building an extensive online presence, optimizing websites for mobile devices, offering virtual consultations, and providing detailed vehicle information with high-quality images and videos. Additionally, implementing virtual finance and trade-in tools and offering home delivery options can help bridge the gap between the digital and physical retail experience.
This shift is not just about creating a user-friendly website; it’s about integrating e-commerce systems that allow for a seamless buying experience. Dealerships must also prioritize social media engagement, digital marketing, and tools like chatbots to engage with potential customers effectively.
2. Inventory Management and Supply Chain Disruptions
Car dealerships have always managed inventory carefully, balancing customers’ needs with the supply chain. However, the COVID-19 pandemic and its aftereffects have made inventory management more complex. With semiconductor shortages, factory shutdowns, and logistical bottlenecks disrupting production, dealerships now face longer lead times and unpredictable stock levels. Global supply chain disruptions have led to delays in vehicle production and shipping, making it harder for dealerships to meet customer demand.
The Challenge
In 2020, the automotive industry faced significant production delays due to supply chain interruptions, particularly in the availability of semiconductor chips, which are critical for modern vehicles. These disruptions have left many dealerships with low inventory levels, resulting in longer customer wait times. This can lead to lost sales and frustrated customers.
Additionally, inflation and rising material costs drive up vehicle prices, leaving some customers unable to afford the cars they want.
Solution
Car dealerships must become more agile and adaptive in managing their inventory. This can involve diversifying suppliers, increasing communication with manufacturers, and considering just-in-time inventory systems to prevent overstocking or stockouts. Furthermore, dealerships should look into offering pre-order options, allowing customers to reserve vehicles even before they are available for delivery.
Investing in data analytics to predict inventory needs and trends can also help dealerships optimize their stock levels. ATN offers a Dealership Analysis service to help you optimize both your digital and in-store operations. We assess your online presence, sales strategies, and lead management to identify areas for improvement. With a 26-week action plan, we provide clear steps to enhance efficiency, increase sales, and strengthen your dealership’s performance.
3. Changing Customer Expectations
The automotive retail experience has changed, and so have car buyers’ expectations. Today’s consumers want more than just a reasonable price—they seek a seamless, personalized, and convenient experience.
The Challenge
Car dealerships face the challenge of meeting the rising expectations of consumers who expect a high level of convenience and personalization. Customers want transparency in pricing, easy access to financing options, and the ability to complete most of the purchase process from the comfort of their homes, all of which makes conventional sales tactics less effective.
Solution
To meet these changing expectations, dealerships should focus on delivering a customer-centric experience. Offering flexible purchasing options like online buying, home delivery, and virtual showroom visits can help enhance convenience. Also, offering personalized recommendations—based on browsing history from your website and individual customer preferences—can create a more tailored and engaging experience.
Customer service is essential, and dealerships must train their sales teams to prioritize listening to customer needs rather than pushing for a quick sale. Consequently, using customer relationship management (CRM) systems can also help track interactions and provide a more personalized experience over time.
4. Shifting to Electric Vehicles (EVs)
Electric vehicles (EVs) are becoming increasingly important in the automotive industry, with a 25% rise in sales at the end of 2024. For dealerships, this growing demand presents a significant opportunity—but also introduces a new set of challenges that require adaptation and strategy.
The Challenge
Car dealerships must prepare for a shift in both inventory and customer demands. EVs are not just different in technology; they also require a different sales approach! Consumers may have questions about range, charging features, and maintenance costs, and if you accommodate the sales of electric vehicles, your dealership must be well-equipped to provide accurate information.
Furthermore, car dealerships must consider how they will handle servicing EVs, which require different maintenance and repair processes than traditional internal combustion engine (ICE) vehicles. The transition to EVs also means that dealerships must invest in training their staff and updating their facilities to accommodate EV-related services.
Solution
As a dealership owner, you should invest in EV-specific training for your sales and service teams to ensure they can effectively educate customers. Displaying EVs prominently in showrooms and offering test drives will also help raise awareness. As more consumers turn to electric vehicles, dealerships can become a one-stop shop for all things EV, offering information on home charging options and incentives for purchasing EVs.
To handle the increase in EV sales, you should also partner with charging infrastructure providers to help customers understand the charging options. In addition, providing maintenance packages tailored explicitly for EVs can help attract customers looking for low-maintenance, long-term solutions.
5. Maintaining Profit Margins in a Competitive Market
The automotive retail market is highly competitive, and with the rise of car subscription services and direct-to-consumer manufacturer sales models, dealerships face pressure to maintain healthy profit margins while staying competitive.
The Challenge
Consumers can easily shop for the best deals, so dealerships must balance competitive pricing with profitability. Additionally, the cost of acquiring and maintaining vehicles is rising, particularly as new technologies and features are incorporated into modern cars.
Furthermore, many dealerships rely on service departments for a significant portion of their revenue. The challenge is diversifying income streams while maintaining a competitive edge.
Solution
Dealerships can increase profitability by offering value-added services such as extended warranties, maintenance plans, and accessories. On top of that, utilizing digital platforms to showcase inventory and run targeted marketing campaigns can help drive more customers to the dealership.
Focusing on customer retention is essential. Creating loyalty programs, providing exceptional after-sales service, and offering financing solutions can all help keep customers coming back for repeat business. ATN’s Phone Training Manuals provide dealerships with the tools to perfect their inbound calling strategy, ensuring every customer inquiry is handled professionally and effectively.
6. Regulatory and Environmental Compliance
Car dealerships face regulatory challenges as the automotive industry faces increasing pressure to reduce emissions and improve fuel efficiency. New environmental regulations, federal laws, and government policies can impact the types of vehicles dealerships can sell, how they must report emissions, and how they can market specific models.
The Challenge
Dealerships must understand the local, national, and international regulations. For instance, many countries are pushing for stricter fuel efficiency standards, and some have introduced more stringent rules on vehicle emissions. Car dealerships must keep up with these changes to avoid fines and legal repercussions.
Moreover, as governments introduce incentives for electric vehicles and low-emission models, dealerships must stay informed about the programs available and how they can help customers take advantage of these opportunities.
Solution
Car dealerships should invest in legal and regulatory compliance teams to stay updated on the latest environmental policies. They should also consider offering a broader selection of hybrid and electric vehicles to meet consumer demand and government regulations.
Turn Challenges into Opportunities with the Right Training & Consulting
Running a successful dealership requires the right strategies, skilled employees, and a commitment to continuous improvement. At Automotive Training Network (ATN), we’ve been helping dealerships maximize sales, optimize operations, and enhance customer experiences for over 40 years. Whether you need sales training, digital lead management, or executive consulting, our proven programs are designed to deliver real results.
i) Comprehensive Training: Virtual coaching, in-dealership workshops, and intensive boot camps
ii) Expert Consulting: Financial reviews, operational strategies, and complete dealership management
iii) Guaranteed Results: Proven methods to boost sales, efficiency, and profitability
Don’t settle for outdated strategies—improve your dealership’s performance today. Learn how our training and consulting programs can drive measurable success for your team!
FAQs
- How can car dealerships improve their online presence?
Car dealerships can improve their online presence by investing in an attractive, user-friendly website, optimizing it for mobile, and offering virtual consultations and online sales options. They should also engage with customers on social media and provide valuable content like car reviews, tips, and industry news.
- Are electric vehicles a good investment for dealerships?
As the demand for electric vehicles (EVs) continues to grow, dealerships that invest in EVs can tap into a rapidly expanding market. EVs also often benefit from government incentives and environmental benefits, which can appeal to customers.
- What is the impact of the supply chain crisis on car dealerships?
The supply chain crisis has led to production delays, lower vehicle inventory, and increased prices. Dealerships must adapt by optimizing inventory management and exploring new supply chain strategies to meet customer demand.
- How can dealerships stay competitive in a crowded market?
Dealerships can stay competitive by offering a seamless customer experience, embracing digital tools, and diversifying their services. Providing excellent after-sales service and financing options are key to retaining customers.
- What can car dealerships do to stay compliant with environmental regulations?
Dealerships can stay compliant by regularly reviewing local and national regulations, investing in eco-friendly vehicle options, and educating their customers about available incentives for purchasing low-emission vehicles.