Business for Sale Industry Economics
2003 - 2020
2020 - 2026
Revenue for the Automobile Wholesaling industry has decreased during the five years through 2020. Automobile retail sales skyrocketed early in the era, owing to growing per capita disposable income and improved credit availability. Consumers were more ready to pay a premium for high-quality items and had greater access to financing for industrial items, which boosted downstream demand.
However, the COVID-19 (coronavirus) pandemic that is expected to occur in 2020 has led in decreased demand and a projected reduction in industry income. Over the five years through 2020, industry sales fell at an annualized rate of 5.7 percent to $504.9 billion, including a 24.3 percent decline in 2020 alone.
Additionally, profit has decreased over the last several years as a result of unpredictable buying prices, diminishing demand, and more price-based competition. After a significant decline early in the era, the global price of steel increased once again, increasing buying costs as manufacturers increased their pricing. Due to the high and growing amount of price-based competition, operators are unable to completely shift costs downstream, which may result in a decline in profit.
Low profitability has resulted in a decline in industry participation, as the number of firms has decreased during the period. Additionally, when the bigger domestic corporations, such as General Motors Company and Ford Motor Company, recovered from prior restructuring procedures, they increased their market share in the present time, leaving less room for smaller operators.
Revenue is expected to expand in the future, as new automobile sales rise and per capita disposable income increases. As a consequence, revenue is predicted to increase by an annualized 4.1 percent to $618.6 billion by 2025. This gain, however, will almost certainly be mitigated slightly by increasing oil costs, which may make people more hesitant to acquire a new car.
While the predicted rise in gasoline costs may reduce total vehicle demand, it will likely enhance customer demand for fuel-efficient automobiles during the next five years. As a consequence, several US manufacturers are expected to begin making eco-friendly automobiles in-house, possibly boosting the income of wholesalers that specialize in more fuel-efficient automobiles. Additionally, industrial establishments, employment, and profit are all predicted to increase as economic circumstances improve.
Over the five years through 2020, the Automobile Wholesaling industry’s success has been significantly associated with that of major domestic automakers. The economy increased steadily for the most of the era, which benefited the whole automobile industry. Consumers’ enthusiasm for auto purchases has increased as disposable income and availability to finance have increased. Automobile manufacturers have been keen to accommodate this demand, which has helped wholesalers.
Early in the time, rapid rise in new automobile sales aided revenue development in this business. However, the global price of crude oil surged dramatically in 2017 and 2018 as interest rates climbed, dampening customers’ willingness to acquire new automobiles at the period’s conclusion.
Additionally, the COVID-19 (coronavirus) pandemic in 2020 has lowered consumer demand for autos, owing to widespread economic anxiety and a quickly growing unemployment rate. Over the five years through 2020, industry sales is expected to decline at an annualized pace of 5.7 percent to $504.9 billion, including a 24.3 percent decline in 2020 alone.
Wholesalers provide automobiles to automobile dealerships and other automotive retail outlets for sale to the general public and companies in the trucking and freight industries. Automobiles, light trucks, and large trucks are all costly, which is why the majority of people and companies rely on credit and finance to make purchases.
Credit availability has increased over the last five years as a result of record low interest rates and economic growth over most of the time period. While loan availability remained strong in 2020, the coronavirus epidemic eroded consumer and company confidence, reducing demand for autos and resulting in revenue decreases.
Industry operators have seen decreasing demand as consumer confidence and expenditures have declined. Over the last five years, the Consumer Confidence Index, which gauges consumers’ confidence in their economic and job prospects, has declined. When customers’ financial security deteriorates, they are less inclined to make significant discretionary purchases like a new automobile, which is detrimental to the business.
Interest rates, on the other hand, have remained historically low throughout the era. As a result, borrowing costs have remained relatively low and lending requirements have loosened, assisting in decelerating the fall in demand for industrial goods. Additionally, automotive dealerships were compelled to shutter temporarily as a result of state government laws aimed at curbing the coronavirus’s spread. Additionally, this shutdown decreased demand for industrial goods.
Due to the general fall in income, it is predicted that the workforce would shrink throughout the term. Employment in the sector has decreased at an annualized rate of 3.2 percent to 108,028 people during the five years to 2020, as businesses cut their workforces in response to declining demand.
While job levels increased steadily early in the period, a decline in demand and the temporary closure of downstream vehicle dealerships resulted in an overall decline in employment levels. Additionally, operators are striving to cut labor costs by automation and more effective inventory management and administrative operations; nonetheless, the industry’s key operations need human labor and cannot be mechanized at this time.
The number of operators in this business has also decreased over time, mostly as a result of falling profitability driving smaller companies out. Additionally, while the largest companies in this industry maintain a relatively minor presence in the market as a result of lingering effects from the restructuring processes they initiated prior to the period, they reclaimed a sizable portion of their former market share during the period, leaving less room for smaller operators to establish themselves. Over the five years to 2020, the number of businesses has fallen at an annualized rate of 3.2 percent to 8,428.
Profitability has dropped in lockstep with revenue over the last five years, as higher purchasing costs, price-based competition, and decreased downstream demand all contribute to profit declines. At the start of the period, growth in downstream demand, drops in the global price of oil, and drops in the global price of steel enhanced profit, as revenue increased gradually while purchase and transportation costs remained manageable.
Transportation expenses decreased, and growing demand aided in the company’s rapid revenue development. However, the global steel price grew dramatically in 2016 and 2017, reducing earnings later in the term as acquisition prices soared.
Additionally, operators saw significant drops in demand as a result of the economic instability created by the 2020 coronavirus pandemic. In aggregate, these negative tendencies later in the period have resulted in profit falling to 2.2 percent of sales in 2020, down from 4.2 percent in 2015.
Revenue for the Automobile Wholesaling sector is predicted to improve in the next years as a result of the losses sustained during the five years to 2020. New vehicle sales are predicted to rebound after a period of decline, while per capita disposable income is predicted to continue growing. These factors are likely to drive downstream demand growth during the next five years, until 2025.
However, the global oil price is predicted to rise throughout the forecast period, which would likely discourage buyers from purchasing new vehicles. Additionally, increasing interest rates are predicted to further dampen downstream demand, as buyers will be unable to afford the financing required to acquire a vehicle.
While demand for higher-margin SUVs and light trucks is projected to decline during this time, growing demand for fuel-efficient vehicles, such as hybrid cars, may boost income for wholesalers specializing in more compact and fuel-efficient vehicles. In the five years to 2025, industry sales is predicted to grow at an annualized pace of 4.1 percent to $618.6 billion. It is worth noting that revenue in the sector is not likely to exceed pre-pandemic levels throughout the forecast period.
Revenue growth will almost certainly be limited by rising loan rates and oil costs, which will make customers more hesitant to purchase new automobiles. While credit availability is anticipated to continue to expand, increasing interest rates may make borrowing less affordable for potential auto purchasers.
As a consequence, although both per capita disposable income and new vehicle sales are predicted to expand, growth will likely be muted as more cost-conscious customers opt-out of new vehicle purchases as the affordability of many viable alternatives declines.
Furthermore, despite these problems, per capita disposable income is expected to increase over the next five years, possibly bolstering downstream demand. Wholesalers are likely to prosper throughout the forecast period by adjusting inventory to accommodate changing customer demands.
Despite rising gasoline costs, wholesalers specializing in big duty vehicles are projected to gain greatly from increased transportation activity. Additionally, customers concerned about increasing gas costs would most certainly seek for more fuel-efficient vehicles, which may benefit wholesalers that are better equipped to service this market.
Over the five years to 2025, the number of industrial establishments is expected to expand at an annualized rate of 0.4 percent to 9,591 company locations. Employment growth in the industry is likewise expected to be modest, expanding at an annualized pace of 2.4 percent to 121,344 people during the same period. Increased profit margins and stable demand levels will almost certainly result in more businesses joining the market.
Labor force growth is likely to be limited by a mix of stagnant demand and greater industry use of labor-saving automation technologies. While wholesaling is a labor-intensive sector, updated technology business procedures will almost certainly automate a significant portion of labor during the next five years.
Although fundamental business services such as stock delivery to dealerships cannot be automated at the moment, operators will almost certainly continue to automate administrative chores such as inventory management and scheduling.
Profitability is expected to increase in lockstep with sales growth during the forecast period. The increased pace of new entries into the business may add some pressure to price-based rivalry, which is projected to weigh on average profit margin growth. Additionally, if gas costs rise, buyers may choose for newer, more inventive types of fuel-efficient automobiles, allowing wholesalers to offer more cutting-edge items.
This may help operators mitigate the anticipated decline in demand for other high-margin items in the SUV and light truck segments. While profit will almost certainly improve throughout the time, the slowdown in downstream demand and the continuation of high transportation and purchasing costs will almost certainly maintain profit at a low level.
This sector distributes a diverse selection of new and used vehicles, including cars, light trucks, motor homes, heavy-duty trucks, trailers, and motorbikes. Automobile wholesalers do not sell components or tires for motor vehicles.
Automobile wholesaling is nearing the end of its life cycle. Industry value added (IVA), a proxy for an industry’s total contribution to the economy, is predicted to decline at a 2.3 percent annualized pace during the next decade to 2025. In comparison, the US GDP is predicted to expand at an annualized rate of 1.9 percent during the same time.
Despite below-average performance, the Automobile Wholesaling business is nevertheless deemed mature, as demand for sector goods continues to ebb and flow in lockstep with the overall economy.
Putting aside the modest growth in IVA, the sector’s overall tendencies continue to reflect a mature business. Within the sector, innovation is concentrated on current goods and service delivery, rather than on new markets. The bulk of product innovation happens farther up the supply chain, with producers, with wholesalers primarily responsible for distribution.