3 major challenges impacting the automotive industry in Australia

The automotive industry in 2025 is evolving rapidly, presenting new challenges for automakers and dealerships alike. One of the most significant shifts has been the growing complexity of the market, driven by factors such as the rise of electric vehicles (EVs), supply chain disruptions, and changing consumer expectations. Despite these challenges, new car sales continue to power on, putting additional pressure on dealerships to adapt. In this discussion, we will explore some of the key challenges that automotive dealerships are facing today and how they are addressing them.

The automotive industry faces a range of new challenges, but there are strategies that dealerships can implement to navigate these complexities. Below, we'll examine some of the most pressing issues in the industry today and explore potential solutions to overcome them.

1. Rising Inventory Levels, Floorplan Costs, and the Need for Faster Turnover

A significant challenge currently facing the automotive industry is the rising levels of dealership inventory, driven by recovering production rates and increased vehicle allocations. While supply constraints previously left showrooms empty, the pendulum has now swung in the opposite direction, leaving many dealerships carrying higher-than-ideal stock levels.

This shift brings its own set of challenges, particularly the rising cost of floorplan financing. As interest rates climb, holding onto excess inventory becomes increasingly expensive, putting pressure on dealers to accelerate sales turnover. To stay ahead, dealerships must refine their sales strategies, leveraging targeted marketing campaigns and promotional incentives to maintain a steady flow of vehicle movement. Additionally, optimising inventory mix and pricing strategies can help align supply with demand, ensuring profitability while mitigating financial strain.

2. Increased Competition for Used Cars

As used car prices decline, they are becoming an increasingly attractive value proposition for consumers looking to maximize their budgets. With the price gap between new and pre-owned vehicles widening, demand for used cars remains strong. However, rising inventory levels mean dealerships now face increased competition, requiring them to adapt their strategies to maintain sales momentum.

To stay ahead, dealerships must emphasize the affordability and value of used cars compared to new models. Competitive pricing, flexible financing options, and targeted promotions can help capture cost-conscious buyers. Additionally, sourcing high-demand models and maintaining a well-curated inventory mix can ensure a steady flow of sales. With more dealerships vying for the same buyers, a refined digital retail experience is essential—enhancing online listings, streamlining the buying process, and offering personalized customer engagement can create a competitive edge and drive conversions.

3. Evolving Customer Behavior in a Competitive Market

As inventory levels rise and pricing pressures shift, customer behaviour is evolving to reflect an increasingly competitive market. With more choices available, buyers are taking a more deliberate approach—researching extensively, comparing pricing across dealerships, and seeking the best possible value before committing to a purchase. At the same time, the affordability of used cars compared to new models is attracting more budget-conscious consumers, further intensifying competition.

To adapt, dealerships must create a frictionless buying experience that aligns with today’s consumer expectations. This means streamlining both online and in-store interactions to make the purchasing process faster, easier, and more transparent. A robust digital presence—with real-time inventory updates, competitive pricing insights, and personalized customer engagement—can help dealerships capture buyers earlier in their decision-making process.

With 59% of car buyers conducting most of their research online, dealerships that invest in advanced digital retailing tools—such as interactive vehicle comparisons, trade-in estimators, and financing calculators—can gain a competitive edge. Additionally, mobile optimization is essential, ensuring that customers can seamlessly browse inventory and complete transactions from any device.

As competition increases, dealerships that prioritize convenience, transparency, and a value-driven sales approach will be best positioned to capture and retain buyers in 2025’s evolving automotive market.

Use the right strategies to stay ahead of competitors in the automotive industry

With the help of the right solutions to these and other challenges, your dealership will be able to continue to succeed. Implementing the right software is one of the best ways to keep your dealership on top.

Specifically, reliable business intelligence software can give you what you need to optimise your marketing campaigns, sales efforts, and other aspects of your dealership. Find out more about the benefits of business intelligence software for dealerships to learn what this particular solution can do for you.