The automotive retail sector is experiencing a significant resurgence, with sales volumes approaching pre-pandemic levels. Inventories and incentives are aligning more closely with historical norms, and consumer interest in purchasing vehicles is on the rise. According to CDK's monthly tracking, over 70% of shoppers completed their purchase processes at dealerships throughout much of 2024, with customer satisfaction reaching remarkable heights in August and November. This positive trend bodes well for dealers as they prepare for the challenges and opportunities of 2025. However, the return to traditional sales tactics and the influx of new staff unfamiliar with pre-pandemic practices present unique challenges for the industry.

In 2024, the automotive market saw a robust recovery from pandemic-induced disruptions, outpacing the post-Great Recession rebound. Nearly every automaker reported increased sales, culminating in approximately 16 million new car units sold. Yet, the anticipated surge in electric vehicle (EV) sales did not materialize as expected. Instead, hybrid vehicles experienced a boom, with Toyota alone selling nearly a million hybrids. EV sales accounted for roughly 10% of the market, while political uncertainties surrounding EV adoption may further complicate the landscape in 2025.

Despite the tepid performance of EVs, consumer awareness and openness towards electric vehicles have grown significantly. A recent CDK study revealed that 31% of gasoline vehicle buyers now express willingness to consider an EV, up from 18% the previous year. Additionally, 54% of hybrid vehicle purchasers indicated they would buy an EV in the future, reflecting a growing familiarity with EV technology and infrastructure.

The return of healthy inventories has also impacted dealership operations. By the end of 2024, new car stock had surpassed 3 million units, leading to increased incentives and busier sales teams. Dealers noted that 17% of their sales personnel had less time for selling activities compared to the previous year, a figure that has steadily risen since 2021. Moreover, acquiring additional inventory became a priority for many dealerships, doubling from 9% in 2023 to 16% in 2024.

Artificial intelligence (AI) is increasingly becoming an integral part of dealership operations. While 28% of dealers are already leveraging AI, with 68% reporting positive outcomes, concerns about its novelty and reliability persist. Nevertheless, 65% anticipate a beneficial impact from AI in the future. As dealerships look ahead, they must balance the integration of new technologies with the need to maintain exceptional customer experiences.

Facing the uncertainties of the coming year, dealers will need to stay agile and focused. Building and training their teams, utilizing data-driven insights, and delivering top-tier customer service will be crucial. Despite external challenges, dealerships are poised to navigate the evolving automotive landscape with confidence and innovation.