Finding Profits Amid Cost Pressures: An Auto Industry New Normal

According to Forrester’s latest research, the AI hype is over. How can it be? And if it is, how can companies prosper on this new frontier and position themselves for growth in the months ahead? What else is keeping B2B and B2C revenue leaders up at night?

In our latest series, our sales acceleration experts weigh in on this and other pressing sales-shaping trends with deep, diverse insights.

Q: What are the top three things keeping automakers up at night right now?

1. Finding Profitability Amid Profound Cost Pressures.

Manufacturers are operating in a perfect storm of financial strain driven by massive EV investment write-offs, tariffs, supply chain challenges, rising production costs, and vehicle ownership becoming prohibitively expensive. Automakers have already written off $55 billion in EV losses, and since their implementation, tariffs have cost them $35 billion to date (source: Automotive News).

2. Stretched Vehicle Affordability. 

Manufacturers are trying to navigate whether, and if so, the degree to which they can pass their increasing costs along to customers—who are already stretching to afford their vehicles—without alienating them. The average new car monthly payment is $770, and the average monthly used car payment is $544. The average loan term is 69 months, with many people even financing for 96 months, in pursuit of more manageable payments.

3. Service Customer Attrition. 

For the first time last year, more customers had service work completed at independent repair facilities than at dealerships. Service departments are the backbone of dealerships. They’re resilient because, regardless of economic conditions, vehicles will always need repairs and service. They’re also highly profitable—generating typical margins of 45-55%, says McKinsey & Co. A healthy dealership should aim for a fixed-cost absorption rate of 100% or higher. But with service work eroding so heavily, many dealers are leaving significant opportunity on the table.

Q: What can dealerships do to optimize profitability in the months ahead?

Intensify Their Fixed Ops Focus. Healthy service departments can go a long way to bringing dealers through tough times. There’s a widely held customer misconception that non-dealer repairs and service are much cheaper. Dealers can attract service customers back—and make them stickier—with offerings like mobile service. Because customers love the convenience, they’re more likely to be loyal to dealers who offer it. Few independent shops offer this service, and independent mobile repair techs are limited in the services they can provide, making this a unique differentiation opportunity for dealers.

Invest in Their Technicians’ Career Paths. There is a well-documented, critical, nationwide shortage of automotive technicians. The US Bureau of Labor Statistics projects an average of 67,800 openings for automotive service technicians and mechanics each year through 2033. In addition, our data shows that dealers lose an average of 30% of their technicians every year, and techs with less than three years of experience and who lack training or original equipment (OE) certifications are most likely to hop from dealer to dealer. The dealerships with the most success not just recruiting but retaining technicians are helping them define their career goals and paths and providing them the support and resources to get there—from mapping out certifications and education needed for and the pay raise they can expect with their chosen path, to paying for any courses they need, to taking advantage of OEM apprenticeship programs, to creating a culture where budding techs not only feel valued but can envision themselves growing with that dealership for the long term.

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