The 2024 Kerrigan OEM Survey, which provides a critical window into the perspectives of OEM executives whose views are not often shared publicly, show that OEM executives have a largely positive outlook regarding the health of the auto retail industry. They expect auto retail earnings to normalize at higher levels as new-vehicle sales rebound and new vehicle gross margins to remain above pre-pandemic levels. The results also make clear the industry’s transition to EVs will be much slower than originally projected and that OEMs are preparing necessary contingency plans for increased internal combustion engine (ICE) and hybrid production to meet consumer demand and the U.S. auto market reality.

The second annual OEM executive survey found that the majority of respondents (54%) expect dealership profitability to decline in the next 12 months, an improvement from 2023 when 69% of respondents expected a decline. Consistent with this improved outlook, 41% of executives expect profits to remain the same over the next 12 months, up from just 24% last year. As with 2023, a slim minority project dealership earnings to increase in the near-term. These results indicate auto retail profits are beginning to normalize for many franchises. Of the executives surveyed, just 38% believe new-vehicle gross margins will return to pre-pandemic levels, while the majority of respondents (62%) project margins will normalize above 2019 levels (ranging from 50% to over 150% above 2019 levels). Despite high interest rates and consumer affordability challenges, 44% of surveyed executives expect new-vehicle sales to increase over the next 12 months, while 48% project sales will remain at 2023’s levels. Just 8% expect a decline in sales over the next 12 months.

Higher projected sales are likely a byproduct of rising new-vehicle inventory expectations. Over the next 12 months, OEM executives surveyed project higher inventory levels with the majority (70%) expecting days’ supply of new vehicles to normalize at 60-90 days, up from 38% in 2023. Just 22% of respondents project days’ supply to remain within 30-60 days in the next 12 months, down from 59% in 2023. Also, the survey saw a nearly threefold increase in OEM executives who believe days’ supply will reach 90+ days in the next 12 months. Notably, as of June 2024, industry days’ supply of new vehicles was 76 days, squarely in the majority’s expectations.