Manufacturer Pressure Toward Direct Sales Models Vehicle manufacturers continue to explore selling vehicles directly to consumers rather than through traditional franchised dealers. These “direct sales” or “agency” models are often positioned as limited or experimental but are used to test greater factory control over pricing, branding, customer relationships and data. While widespread replacement of the franchise system appears unlikely in the near term, these initiatives place pressure on dealer margins and autonomy and can set precedents (such as factory-controlled reservation systems) that later factories try to impose on the traditional franchise framework. Dealers should expect continued efforts by manufacturers to reshape the dealer’s role, even where the franchise system remains intact. Cybersecurity and Protection of Customer Information Dealerships are on track to collect massive volumes and types of customer information, including sensitive personal and financial information. Artificial intelligence tools will only magnify this trend. This expanding data footprint makes dealerships more attractive targets for cyber incidents and more vulnerable to compliance failures, particularly where data flows through multiple vendor systems. At the same time, regulators and state lawmakers are signaling heightened scrutiny, with evolving expectations around written security programs, vendor oversight and the lawful use of data and artificial intelligence. As these pressures converge, cybersecurity is becoming a growing business and legal issue that will demand sustained attention from dealer management in the coming year. Valuations, Mergers and Acquisitions, and Buy-Sell Activity The market for buying and selling dealerships remains active, with continued interest from both regional and national dealer groups, but 2026 is seeing buyers becoming more demanding in asking sellers to prove their worth. Valuations are still influenced by brand strength, market demographics, real estate ownership and operating performance, yet buyers are increasingly focused on data-driven proof of sustainable earnings, compliance and predictable future performance. For traditional single-point, family-owned dealerships, the window to achieve top-tier valuations will narrow if they cannot support pricing with thorough documentation and due diligence materials, as reliance on franchise reputation alone is often no longer sufficient. Electrification and Changing Incentives for Alternative Power Vehicles In 2025, the EV landscape entered a new post-incentive era, the impact of which we will see even more acutely throughout 2026. Federal tax credits are scheduled to narrow even further and, in many cases, sunset completely. As incentives fall away, the slower demand will put pressure on dealer inventory, pricing and sales performance. Dealers should place greater emphasis on demand forecasting, inventory discipline and clear customer messaging as hybrids regain relative strength. Succession Planning and Manufacturer Approval of Ownership Changes Succession planning is coming more to the fore as manufacturers take a more active role in reviewing dealer ownership and control. Rather than waiting for a proposed transfer, many manufacturers are now using annual dealer agreement renewals and addenda to request more detailed information about ownership structures, trusts, limited liability company operating agreements and potential future changes. While this increased scrutiny can create friction and tighter timelines, dealers continue to have important rights under state franchise protection laws and should be cautious about providing information or agreeing to changes that go beyond what is required. As this trend accelerates in 2026, dealers would be well-served to review these requests carefully and consult experienced counsel before accepting demands for heightened oversight by or information sharing with the factory. Supply Chain Disruptions, Tariffs and Local Sourcing Supply chain issues extend beyond past shortages and now include exposure to tariffs, shifting production locations and regional sourcing decisions by manufacturers. Tariffs will invariably increase vehicle costs and disrupt dealer pricing strategies. Digital Retailing, Online Sales and Data-Driven Marketing Many, if not most, customers now expect to begin, and even complete, large portions of the vehicle purchase process online, including selecting vehicles, estimating payments and submitting credit applications. There remains a gap between using online tools and integration with in-store processes. While adoption has increased, dealers need to take a hard look at whether their online tools actually integrate with showroom operations, as gaps between the two directly affect customer experience, deal completion and legal compliance. The growing use of online marketing makes this alignment even more critical, as inconsistencies between what customers see online and what happens in-store can negatively impact credibility, expose operational weaknesses and lead to serious liability. 29
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