Corporate profit and business activity slowed, causing a steep drop in demand for cars
Los Angeles, CA (PRWEB) June 04, 2013
The Online Car Dealers industry retails automobiles online to consumers and businesses and provides related services, including auto loan financing and vehicle trade-in and car-selling services. Included within this industry are online-only dealers and brick-and-mortar dealers that offer online purchasing. The industry experienced its share of wear and tear during the Great Recession, which led to a downturn in per capita disposable income and consumer spending. In turn, corporate profit declined and overall business activity slowed. According to industry analyst Sean Windle, “These economic factors caused a steep drop in industry demand from consumers and businesses, with revenue falling by double digits in 2008 and 2009.”
Improving economic conditions post recession and government incentive programs, however, resulted in overall positive growth from 2008 to 2013, with industry revenue expected to increase at an annualized rate of 3.8% to $20.8 billion during the period. Much of that growth took place in 2010 and 2012, with revenue climbing 20.2% and 7.7%, respectively. In 2011, industry revenue growth experienced a temporary hiccup as the effects of government incentive programs, such as Cash for Clunkers, wore off.
“Along with overall revenue growth, average industry profit margins rose thanks to cost-cutting measures such as employee layoffs, facility closures and others,” Windle says. “In addition, strong demand coming out of the recession, especially for compact cars, hybrids and other fuel-efficient vehicles, has allowed industry dealers more pricing flexibility, which has helped widen margins.” Attracted by improving revenue and margins, potential market opportunities and rising demand for new and used vehicles, more companies are tapping into the Online Car Dealers industry. Given the low capital equipment start-up costs and moderate barriers to entry, the industry is projected to experience an influx of new operators in the coming years.
Growth is expected to slow over the next five years, compared to the large gains experienced in the early part of the past five years. Despite stronger demand from consumers and businesses, the industry continues to face challenges in luring consumers to buy cars online. In addition, the industry faces threats from potential future legislation that would give states the ability to collect sales tax from out-of-state online retailers. These and other similar measures would increase costs for online car dealers and have a negative effect on demand and profit. For more information, visit IBISWorld’s Online Car Dealers in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry retails automobiles online to consumers and businesses and provides services to aid in the purchase of automobiles. Autos include passenger cars, trucks and sports utility vehicles (SUVs). Some players offer their customers trade-in, car financing and car selling services. This industry does not include classified websites that feature reviews, guides, photos and advertisements of new and used vehicles for sale.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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