The automotive retail industry entered 2025 at a crossroads. The first quarter of the year did little to clear up that uncertainty. This year’s Q1 Haig Report showcases a market filled with optimism yet balances it with challenges emerging from tariffs and other economic headwinds.
Despite strong demand in the buy-sell market, transaction activity plummeted by 57 percent year over year in Q1. Only 68 dealership rooftops changed hands during the quarter, making it the slowest Q1 since 2015. The uncertainty surrounding tariffs and last year’s presidential election caused both buyers and sellers to hit pause, seeking clarity before committing resources.
Interestingly, most purchases, about 90 percent, were by private buyers. Among public dealership groups, Lithia Motors and AutoNation closed transactions, while others, like Group 1 and Asbury Automotive, are poised for substantial deals in the coming months.
While Q1 was sluggish, the overall market remains robust. Haig Partners anticipate increased buy-sell activity throughout the rest of 2025, as more clarity around tariffs and market conditions emerge.
Strong Profits and Elevated Blue Sky Values Persist
Dealership profits are holding steady, nearly double their pre-pandemic levels, despite a slight 4.2 percent decline year over year. Blue sky values, representing intangible dealership worth, remain at an average of $20.7 million per publicly owned U.S. dealership. That is a one percent decline from 2024, but still up nearly 100 percent from what it was in 2020.
This resilience reflects the industry’s adaptability, with strong F&I, used car, and fixed operations profits offsetting declining margins on new car sales. Dealers feel confident projecting stable, long-term profitability, spurred by anticipated economic recovery and consumer demand by the second half of 2025.
Noteworthy Trends
Tariffs Shake the Industry
Newly imposed automotive tariffs are introducing layers of complexity. Brands that rely on heavy imports, like Audi and Land Rover, face significant vulnerabilities. Meanwhile, OEMs with high levels of U.S. production, such as Ford and Nissan, are better positioned to weather tariff impacts.
Sales and SAAR Strength
The seasonally adjusted annual rate (SAAR) for vehicle sales averaged 16.7 million units in Q1 2025, with March and April both exceeding 17 million units. Consumer anticipation of tariff-induced price hikes likely drove many to purchase vehicles earlier in the year.
Used Car Market Gains Momentum
Rising new car prices and tariff uncertainty have shifted some attention to the used car market. Used vehicles’ gross profits rose 8.5 percent quarter-over-quarter, with strong demand contributing to higher profitability.
Fixed Operations on the Rise
Dealership fixed operations saw a 5.8 percent profit increase, driven by greater EV repair requests and planned technician retention initiatives. This demonstrates growing consumer interest in maintaining their vehicles for as long as possible, especially as affordability challenges persist.
Changing Consumer Sentiment
Consumers are increasingly cautious about market conditions. With inflation and affordability concerns looming, vehicle pricing and economic conditions will likely shape auto retail trends in upcoming quarters.
Franchise Snapshot
The fluctuating market in Q1 did not treat all franchises equally, but many of the nation’s top brands benefitted from the tariff-induced rush to the dealership. General Motors (GM) brands like Chevrolet and GMC saw sales increases, with GMC recording the best first quarter in brand history. Lexus also had its best-ever first quarter in the U.S, with vehicle sales up 5.8 percent year over year.
Toyota led the midline import segment, with electrified vehicles accounting for 50 percent of Q1 sales. Kia and Hyundai continued their streak of sales growth, benefiting from domestic production investments shielding them from tariff vulnerabilities. Luxury brands delivered notable increases in Q1 with Porsche leading all brands with a sales increase of 40.6 percent. Meanwhile, Audi faced inventory and tariff challenges as sales slipped 3.4 percent in Q1.
Key Takeaways for 2025
Inventory Shortages and Demand Fluctuation
Once-stable inventory levels fell sharply at the end of Q1 as sales surged. Some automakers, particularly those who rely on imported vehicles, may struggle to meet demand amid prolonged tariff negotiations.
Automation and Long-Term Vision
Dealerships and OEMs are investing in future-proof solutions like mobile servicing and EV repair specialization, aligning their operations with consumer trends for transparency and convenience.
Blue Sky Resilience
Despite market fluctuations, values and dealership interest remain steady. Transactions involving top brands like BMW and Honda continue to set records, instilling confidence in the market.
Preparing for What’s Ahead
Amid these dynamic trends, Haig Partners remains optimistic about the future of auto retail. Dealers are advised to take a long-term perspective, focusing on profitable operations, retaining top talent, and navigating the uncertainty of tariffs.
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