June 18, 2025
For the third VADA Annual Convention in a row, industry analyst and investor Steve Greenfield, founder and CEO of Automotive Ventures and a respected voice in auto technology and investment, delivered a sweeping look at the current and future state of automotive retail.
Greenfield drew on decades of experience and insights from both traditional and emerging markets, and walked dealers through major forces shaping their business — from EV adoption and Chinese competition to artificial intelligence (AI) innovation and evolving consumer preferences.
Steve Greenfield speaking at the VADA Annual Convention on June 9, 2025. (Photo: Sean Toler.)
His bottom line: The dealership model remains resilient and adaptable, but dealers must embrace innovation, stay vigilant against external threats, and never lose sight of the customer.
Here are his takeaways:
Dealer profitability and the post-COVID plateau
- Profitability remains well above pre-COVID levels, but margins are trending back toward historical norms (~2–3% net profit). “And I don’t see that changing,” he said.
- The strength of the dealership model lies in its adaptability and diversification. Successful dealers manage up to eight interdependent profit centers.
- Dealers’ ability to reallocate resources quickly across departments has helped maintain resilience through disruptions.
Direct sales threat: Real, but limited
- OEM enthusiasm for direct-to-consumer models like “agency sales” has cooled, largely due to the financial burden of holding inventory.
- Recent moves by brands like Volkswagen and Afeela (the Honda/Sony joint venture) may test the franchise model, but he believes most OEMs will stick with dealers due to logistical and economic realities. “With all due respect to the OEMs, I think they will quickly realize that trying to build brand new consumers is not their forte,” he said, “and they will quickly pivot to starting to push these vehicles through the dealer base.”
Electrification: Neutral for dealers…for now
- Full battery electric vehicle (BEV) adoption has plateaued around 8%, and hybrids are gaining more traction — a trend we have seen in Virginia. Tesla provides half of those sales, but is a brand under duress.
- Technological breakthroughs — like solid-state batteries that can be charged as quickly as filling a gas tank, plus longer range — could reignite consumer interest.
- And so, dealers should prepare for a slow but inevitable shift to EVs (whether BEV or hybrid), as future generations care less about powertrain, so long as the vehicle has "utility and convenience for the consumer [and] there will be implications strategically to how you think about your business as a result."
Tariffs and Chinese competition
- 100% tariffs on Chinese imports (supported by both political parties) are a short-term protection strategy. “We need to hopefully encourage the legacy automakers, both here and in Korea and Japan, to have a strategy to compete against the Chinese,” he said.
- The longer-term threat comes from China’s ability to produce high-quality vehicles at 70% of legacy automaker costs — and as much as five times faster. China has systematically built dominance in the EV supply chain, from mining, materials, and manufacturing.
- He also warned dealers not to dismiss the quality of Chinese vehicles as “cheap,” as their vehicles are increasingly high quality, low-cost, and designed and built quickly.
- Greenfield urged dealers to stay open-minded: Chinese brands could soon seek U.S. dealer partners, mirroring how Toyota and Hyundai entered the market decades ago.
Fixed Ops and connected cars are a growth opportunity
- Dealers capture just 30 percent of post-warranty service work, which could rise as cars become more connected and complex.
- OEM software will increasingly and literally (through maps) guide drivers back to franchised dealers for service — a reversal of the long-term trend toward independent shops.
- He sees strong upside in fixed operations if dealers invest in training, technology, and service excellence.
- Consumers should start thinking about adding warranties to their vehicles just as they do extended care protection for devices like smartphones, he said.
Affordability crisis and repair complexity
- Vehicle repair inflation has outpaced overall inflation more than 2.5 times more, driven by vehicle complexity and supply chain shocks.
- Megacasting and vertically integrated EV components are making vehicles harder and costlier to repair.
- Insurers are becoming selective, and rising premiums could further pressure affordability and demand.
Digital retail and autonomy
- Direct online car buying is still a “rounding error” and represents a negligible portion of total car sales — so small, in fact, that it’s nearly insignificant in the overall numbers. Most consumers prefer face-to-face engagement.
- Autonomous vehicles like Waymo are making progress, especially in dense cities, but Greenfield sees minimal threat to dealers in the near term.
Artificial Intelligence: massive “force multiplier’ potential
- AI adoption (especially automated sales agents that can work 24/7 and serve as “co-pilots” to human sales reps) could dramatically improve dealership efficiency and reduce human capital costs. “Once you train [AI agents], they are a force multiplier,” he said, noting a savvy sales rep can (and has) become far more effective.
- Dealers should push vendors to integrate AI for productivity gains and begin preparing for “generative engine optimization” (GEO) — meaning, optimizing online dealership content to ensure it is picked up and indexed by AI platforms like ChatGPT or Google, and served to consumers.
Automotive Ventures' Steve Greenfield laid out his vision for the automotive retail future, backing it up with hard data. (Photo: Sean Toler)
Focus on lifetime customer value
- The top-performing dealers, according to 20 years of 20 Group financial data, focus not on extracting maximum profit per transaction but on building long-term, generational customer relationships.
Greenfield's final message: The future is already here — but you have to know where to find it.
He closed with a metaphor: It took 1,800 years for humanity to realize the pottery wheel could be flipped on its side and become a wagon wheel. The key is to observe, stay calm, and not miss transformative ideas hidden in plain sight.
Note: Steve gave his keynote presentation to attendees of ASOTU Con a few weeks earlier. Video from that event is below.