High Demand, Low Supply, High Prices Make It A Bull Market For Car Dealerships

High Demand, Low Supply, High Prices Make It A Bull Market For Car Dealerships

That's a sure sign, dealers are confident in the long-term health of the auto retail industry, despite some potential risks, including the switch to electric vehicles. "The next two to three years should be golden years for car dealers," said Alan Haig, president of Haig Partners, Fort Lauderdale, Fla., a firm that brokers dealership mergers and acquisitions, in a phone interview. Haig said in a report on dealership M&As published March 31 that 640 dealerships changed hands in 2021, more than double the pre-pandemic level of 299, in 2019, and up 86% vs. 2021. In the short term, dealership profits — and consumer prices for new cars and trucks — are through the roof, because of a persistent shortage of new vehicles, combined with high consumer demand. In turn, the COVID-19 pandemic, plus a shortage of computer chips used in vehicle manufacturing, plus other supply-chain problems are responsible for the new-vehicle shortage. Taken together, those factors are a "perfect storm" in favor of dealership profits, Haig said. Not only that, high prices and high profitability are likely to persist, even after auto production starts to recover, because there's so much pent-up demand, he said. Citing industry estimates, Haig said that