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2024 Auto Industry Outlook: Consolidation, and Bailouts

It’s a new year and a clean slate as the calendar turns to 2024.  Rather than set resolutions, I wanted to peer into my crystal ball and play fortune teller, forecasting some of the key trends, developments, and, yes, even baseball outcomes that could unfold across automotive in the coming year. 

We covered plenty of ground, from economic turbulence to tech disruptors to a little far-flung fortune-telling just for fun at the end. I thought it would make sense to break down and expand on some of our sharpest analyses and boldest calls so that dealerships might better anticipate pains and opportunities on the road ahead.

Let’s get to the predictions:

attracting new customers

Government Incentives to Ease Negative Equity Woes

It’s no secret used vehicle values are due for a market correction after an unprecedented run. While the descent has already begun across most segments, I believe significant erosion lies ahead in 2024. In fact, we could approach 30-50% value declines from peak depending on the model. 

This creates a tremendous negative equity crunch at trade-in, with many owners owing significantly more than their vehicle is worth. At some point, this headwind stalls new vehicle sales velocity, prompting the need for federal intervention a la 2009’s “Cash for Clunkers” program.  

What form could this take? Likely a rebate at time-of-trade geared towards driving new vehicle purchases. TThere would surely be total value caps per unit and potential requirements around improved fuel economy.  But ultimately, this would ease the negative equity obstacle and stimulate continued buying activity. If broad economic woes mount, expect a version of this by Q3 2024.

Big Fish Gets Bigger Through Mergers

While hardship squeezes margins for smaller dealer groups, the biggest retailers actually consolidate power during downturns by gobbling up distressed stores. We saw this play out in 2008-2010 as well. I anticipate a fresh wave of buy-sell activity as majors spot targets among family-owned shops less equipped to weather adversity. 

Further out, as free-falling used prices pressure OEM profits in the face of reduced new unit demand, tie-ups begin to make rational sense across manufacturers, too. Christian and I theorized Ford absorbing GM sometime around 2025 or 2026 once this economic pain hits an inflection point. This would allow huge synergies around platform development costs and production capacity optimization.

We’ll revisit these come January 2025 to see how close we got – until then, make it a great year!

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