Artificial intelligence is rapidly reshaping the way businesses operate, and automotive dealerships are no exception. Supporters say it makes their work easier by completing repetitive tasks in minutes instead of hours. Critics, however, worry that AI can become a crutch by doing too much of the problem-solving and thinking for users. The question for dealers is no longer whether AI will influence the industry, but how they can use it strategically while preserving the customer experience that sets great dealerships apart.
Steve Greenfield, founder and CEO of Automotive Ventures with more than 20 years of experience in the automotive industry, has seen its highs and lows. AI is making it easier for everyday users to create software, reducing the need for an advanced degree or a professional programmer. “If I’m the average dealer, all of this sounds great. I may finally be able to get the features I want and no longer be limited to only being able to innovate based on the speed of my legacy software provider,” Greenfield said.
At the same time, AI raises concerns among industry professionals who worry it could threaten their jobs. While AI will change the nature of some jobs, Greenfield believes the technology is more likely to augment employees than replace them outright. AI still lacks many of the human qualities that define successful sales professionals, including personality, eye contact and the ability to build genuine relationships. Most customers still value speaking with a knowledgeable person who can offer experience, insight and reassurance throughout the vehicle-buying process.
The use of AI has the potential to increase productivity and efficiency for the average employee. Employees who use tools such as ChatGPT to draft emails, prepare reports, import data and perform calculations may experience a 10% to 20% increase in output. By reducing the time required to complete routine tasks, AI allows employees to focus on higher-value activities. In a dealership setting, salespeople can spend less time behind a desk and more time interacting with customers, which may lead to increased vehicle sales. AI can also help reduce labor costs by enabling organizations to absorb employee retirements and turnover without necessarily filling every vacant position.
Artificial intelligence has advanced significantly in recent years with accuracy rates ranging from 80% to 95%, depending on the complexity of the task. While AI is not immune to errors, it can help reduce some of the mistakes that occur during routine work. Employees often face competing priorities and distractions that can lead to oversights or inaccuracies. Although those mistakes may seem minor, they can accumulate overtime and result in lost productivity, increased costs and reduced efficiency for an organization.
Greenfield believes AI will affect dealerships in two significant ways. The first is AI is going to provide a viable lever to help dealers insulate them from external shocks and drive more profitability from their operations. The second thing is every dollar saved in labor will flow through to a dealer’s bottom line as an increase in net profit before tax.
Beyond productivity, AI can identify patterns and trends that may be difficult for humans to detect through manual analysis. For example, AI can analyze a dealership’s sales performance from the previous quarter and help develop strategies to improve results or exceed future goals. AI also can evaluate large amounts of data to identify potential risks and opportunities related to rising labor costs, economic downturns and supply chain disruptions. These insights can help businesses make more informed decisions and respond more effectively to changing market conditions.
“In 50 years, the average dealership in America lost money, however the earnings have been predictably stable in a band of one percent to three percent net profit before tax,” said Greenfield. By calculating almost 50% of a dealer’s operating costs are human capital, otherwise known as labor.
Properly implemented, artificial intelligence has the potential to improve a dealership’s bottom line by increasing efficiency and reducing administrative costs. Every dollar saved through increased efficiency or reduced labor costs can translate directly into additional profit. For example, if a dealership saves $10,000 in labor expenses, its net profit can increase by the same amount.
Dealerships are often valued based on a multiple of their net profit before taxes, or NPBT. Using a five-times valuation, a dealership generating $600,000 in NPBT would be valued at approximately $3 million. Increased profitability not only raises the value of the business but also provides a financial cushion during challenging economic periods. Strong profit margins can help dealerships better withstand slower sales, rising costs and other market pressures.
Greenfield’s outlook aligns with broader industry trends. According to Cox Automotive, dealerships that want to remain competitive in a rapidly changing industry should embrace new technologies, including artificial intelligence. As AI continues to reshape business operations, dealerships that delay adoption risk falling behind competitors that are using the technology to improve efficiency and decision-making.
Many automakers are incorporating artificial intelligence into their vehicles, making it increasingly important for dealership employees to understand the technology and answer questions from potential buyers. According to industry forecasts, most vehicles on the road could be AI-powered and software-defined by 2035. As advanced driver-assistance systems and autonomous technologies continue to evolve, artificial intelligence is expected to play a larger role in how vehicles operate, changing the way consumers interact with and think about transportation.
For dealers willing to embrace the technology, AI offers an opportunity to strengthen operations from increased productivity, lower labor costs and improved profitability. Those advantages can create a stronger competitive position and greater long-term value.
“Dealers who stay open-minded about leveraging the potential of AI are going to enter a new era of enhanced productivity, lower labor costs, higher profit margins and greater net worth,” Greenfield said.
