Automotive Outlook: Reflecting On 2024, Gearing Up For 2025

• Agency Model: Stuck in Limbo – Many franchises delayed or rethought agency adoption, with hybrid models proving ineffective for both dealers and manufacturers.
• Government & Policy Uncertainty – Hopes for reinforced support of the ZEV mandate and UK automotive investment faded. The National Insurance Contribution cost changes and rising minimum wage added pressure following the Autumn Budget with long-term impacts still unclear.
• Market Trends – New car registrations rose 2.6% YOY, petrol remained strong, and hybrid sales surged, potentially driven by concerns over EV residual values. Meanwhile, oversupply returned, pushing down EV prices further. (*figures provided by the SMMT)
• Financial Pressures – Salary sacrifice schemes propped up the market, but a gap is forming between tax-efficient lease buyers and retail consumers.
• M&A Activity: The Big Keep Getting Bigger – Large dealer groups continued to acquire owner-managed businesses, with some brand fallout along the way. But not all big deals stuck, some acquisitions triggered a cascade effect, with larger players offloading sites to smaller local dealers.

When it comes to automotive M&A, few know the market better than David Kendrick, Corporate Finance Partner at Cooper Parry. With over 250 automotive deals under his belt, he’s seen the industry evolve, and 2024 was no exception.  

 It was a year of major consolidation, with big-ticket acquisitions reshaping the sector and paving the way for further shifts in 2025. Here are David’s top market insights and what we can expect next.

2024 saw some major moves in the automotive sector, with two high-profile acquisitions leading the charge. Inchcape was acquired by Group 1 a deal that highlights the growing trend of large players consolidating their positions in key markets. This move is just one example of how global retailers are tightening their grip on the industry.  

Similarly, Pendragon was acquired by Lithia another significant transaction that underscores the fierce competition between international dealer groups. These acquisitions are reshaping the competitive landscape, and they’re setting the stage for even more consolidation as we move into 2025.  

One of the biggest shifts in the market is the rise of “Super Groups”. Large, powerful dealer groups that are not only expanding their reach but also transforming how the industry operates. They’re setting new standards for scale, efficiency, and competitiveness, changing the game for everyone.  

At the same time, local market consolidation is picking up steam. Family-owned businesses continue to be acquired by regional operators, which is tightening control over local markets. As this trend grows, smaller, independent dealerships may find themselves increasingly up against these larger, more established players. It’s clear that the competitive environment will only get tougher as we head into 2025.  

As we head into 2025, smaller independent dealerships will remain attractive targets for regional operators looking to expand.   

At the same time, distressed sales are expected to rise as struggling businesses seek buyers. Strong, well-performing dealerships will continue to command premium valuations, while opportunities for turnaround acquisitions at lower valuations will also increase.    

With major consolidation already shaping the market, 2025 is set to be another dynamic year for automotive transactions.  

2025 is shaping up to be a year of significant change in the automotive world. Here’s what to keep an eye on:  

• Agency Model Evolution – Manufacturers and dealers will continue to figure out how to best adapt to this new sales model.  

• EV Advancements – Expect improvements in range, infrastructure, and affordability, making electric vehicles even more accessible.  

• Chinese Brands – With their growing market share, Chinese brands are starting to shake up the traditional OEMs, adding more competition to the mix.  

• Tariffs & UK Production – How will evolving trade policies impact local manufacturing? The question remains as we look at post-Brexit dynamics.  

• EV Incentives – Will the government step up its efforts to encourage EV adoption? Look for potential incentives or policies to drive the shift to electric.  

• Purchasing Power – With interest rates dropping but car prices on the rise, what does this mean for buyers looking to make a purchase in 2025?  

These trends will likely redefine the landscape as we move forward.  

As competition intensifies in the automotive market, price discounting is making a strong comeback. With more players vying for market share, dealerships are expected to offer bigger discounts to attract buyers, setting the stage for a highly competitive year ahead. This shift could shake up pricing strategies and impact margins across the sector.  

Retail registrations are expected to flatline in 2025. That’s partly because the 2024 figures were boosted by a high volume of Motability sales, something many dealer composites have highlighted. But that level of activity just isn’t likely to continue into this year. The SMMT is predicting a modest increase in registrations for 2025, less than 1% – which tells you all you need to know about how cautious the outlook is.

At the same time, falling residual values for EVs and PHEVs are putting pressure on the market. That’s making it tougher for retailers to keep registration figures strong, and it means dealerships will need to rethink their strategies to navigate what’s shaping up to be a more challenging landscape.

We’ve also seen, as expected, a skewed start to Q1 2025. Some registrations that were originally planned for April were pulled forward to avoid the impact of the VED increase, which hit most fuel types. That early shift has had a knock-on effect on the quarterly performance.

Fleet and broker channels are set to play a more prominent role in getting new vehicles to market. As consumer demand shifts and dealers adapt to new sales models, these channels will become essential in reaching a wider audience, driving volume, and enhancing distribution strategies. Expect them to reshape how vehicles are sold in the coming year. 

Agency adoption is set to slow for some brands in 2025, as uncertainty continues to hold back investment from strong operators. Brands that stick to traditional models and offer clear dealer margin guidance will provide dealers with the confidence to focus on running their businesses, rather than navigating shifting sales structures. For many, sticking to what works seems to be the best path forward.  

It looks like the noise around Discretionary Commission Arrangement (DCA)is finally starting to fade, bringing some much-needed clarity for lenders. As we move into 2025, there’s also a broader shift happening in how cars are both sold and financed, opening new opportunities for finance providers to adapt and thrive in an evolving market. It could be the start of a more streamlined and predictable road ahead for the industry.