pre-pandemic.” Skordeles added that tariff pressures and the risk of supply chain disruption will be part- and OEM-specific. “The supply chain is massively complex. OEMs aren’t going to figure out how to build cheaper cars or de-contented trim levels by mid next year,” noted Strand. “Incentives have been running 7.5-8% of average transaction prices,” continued Strand. “The ‘air gap’ in sales in the fall has created some slack — very brand specific — with needed incentives to move product. Some OEMs have been eating tariffs and would like to pull back discounts to protect margins. Raising prices will attract the wrong kind of attention. Throttling incentives may be the least bad answer.” COMPETING FOR SUPPLY IN A TIGHT USED CAR MARKET “New cars are the used car ‘factory.’ It takes three to four years for a lease to work its way into the used vehicle supply,” said Strand. “Today, one in four new vehicles is leased, whereas pre-pandemic, it was one in three. Fewer leases contribute to the tight supply market for used and Certified Pre-Owned (CPO) cars.” Strand added, “We are fundamentally limited on the supply of used vehicles, about 8 to 9 million units short in the 5-year-old and less segment. We are nowhere near generating enough used car supply to move the market. That means used car values and prices should hold stable for the foreseeable future, and that should make room for more leasing, maybe on shorter terms.” Competition is fierce for the cream of the used car crop. Per Strand, “Players like CarMax and Carvana are aggressively sourcing vehicles directly from consumers. And traditional dealers have also gotten into the game of direct purchase. Smaller and mid-sized dealers may find themselves short on inventory and in a tough spot competitively.” Strand continued, “The customer experience is more important than ever. Develop loyalty by maintaining strong customer relationships with a lifetime-value mindset. Do it in the service lane. With vehicles in short supply, you might want to resell that car in the future, so you want them to come back. Emphasize delivering a great customer experience at every touchpoint, with transparency and responsiveness. You don’t want them leaving your dealership feeling unappreciated or neglected and wanting to sell their car to someone else.” FINDING THEIR FOOTING IN THE EV MARKET Expect 2026 to be a reset year with many, but not all, automotive manufacturers pulling back from EV investments. Producers are still trying to figure out how to absorb tariffs and rebuild more resilient supply chains while profitably building vehicles. With so many buyers priced out of the EV market, CATA UP TO SPEED 25
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