AI Expected to Boost Dealership Profits as OEMs Absorb Tariff Costs, Says 2026 Kerrigan Survey
The U.S. automotive retail industry is entering a new phase of transformation, driven by artificial intelligence, dealership consolidation, and evolving market dynamics. According to the latest 2026 Kerrigan OEM Survey, automotive manufacturers remain optimistic about the long-term strength of dealership operations despite challenges such as slowing vehicle sales, higher tariffs, and affordability concerns.
The fourth annual survey, conducted by Kerrigan Advisors, provides valuable insight into how executives from automotive original equipment manufacturers (OEMs) view the future of dealerships across the United States. This year’s findings reveal that manufacturers believe dealerships are becoming more profitable through technology adoption, particularly artificial intelligence, while OEMs themselves are prepared to absorb most of the financial burden created by tariffs instead of shifting those costs to dealers.
The survey also highlights growing confidence in dealership valuations, continued consolidation of dealer networks, sustained merger and acquisition activity, and long-term optimism surrounding electric vehicle (EV) adoption.
AI Emerges as a Major Profitability Driver
Artificial intelligence has rapidly become one of the most important strategic technologies in the automotive retail business. For the first time, the Kerrigan OEM Survey asked manufacturer executives how AI is expected to influence dealership profitability over the coming years.
The results show overwhelming confidence in the technology.
Nearly 59% of OEM executives believe AI will increase dealership profits, while 37% expect it to have a neutral impact. Only 4% believe AI could reduce dealership earnings.
These findings demonstrate that manufacturers increasingly view AI not as an experimental technology but as an essential business tool capable of transforming dealership operations.
AI is expected to improve efficiency across multiple departments, including:
- Sales and lead management
- Customer relationship management
- Marketing automation
- Service scheduling
- Inventory optimization
- Finance and insurance processing
- Predictive maintenance
- Customer support through virtual assistants
By automating repetitive administrative tasks and providing employees with better data-driven insights, dealerships can reduce operating expenses while simultaneously increasing revenue per employee.
The survey aligns closely with findings from the earlier 2025 Kerrigan Dealer Survey, where roughly 90% of dealerships reported they were either already using AI technologies or planned to adopt them soon.
This suggests that both manufacturers and retailers share a common vision regarding AI’s role in shaping the industry’s future.
AI Becoming Core Infrastructure
According to Kerrigan Advisors, AI is transitioning from a technology experiment into core dealership infrastructure.
Rather than replacing employees, AI is expected to help staff become more productive by automating routine work and allowing employees to focus on higher-value customer interactions.
Examples include:
- AI-powered pricing recommendations
- Automated appointment scheduling
- Personalized marketing campaigns
- Inventory forecasting
- Sales forecasting
- Customer retention programs
As these technologies mature, dealerships are expected to generate higher profits while improving customer satisfaction.
This operational transformation is one of the major reasons OEM executives believe dealership earnings will remain resilient over the next several years.
Dealership Buy/Sell Market Expected to Stay Strong
Another notable finding from the survey is the continued confidence surrounding dealership acquisitions and mergers.
For the first time, OEM executives were asked about expected dealership buy/sell activity.
The responses indicate a highly active market.
Approximately 88% of executives believe dealership transactions will either remain at current elevated levels or increase during the next year.
Among respondents:
- 35% expect more dealership acquisitions.
- 53% believe transaction levels will remain similar to today’s strong market.
- Only a small minority anticipate a slowdown.
This outlook supports recent trends observed throughout the automotive retail sector, where consolidation continues to accelerate.
Large dealership groups continue expanding through acquisitions while independent dealerships increasingly evaluate strategic sales opportunities.
Strong profitability, healthy financing conditions, and long-term confidence in dealership economics continue supporting robust transaction activity.
Confidence in Dealership Valuations Remains High
Despite slower vehicle sales growth and ongoing economic uncertainty, OEM executives remain optimistic about dealership valuations.
The survey found that 82% expect dealership blue sky values to either remain stable or increase.
Specifically:
- 21% anticipate higher dealership valuations.
- 61% believe valuations will remain unchanged.
- Only 18% predict declining values.
This represents an improvement from the previous year’s survey, when a larger percentage expected declining valuations.
The findings suggest manufacturers continue viewing dealerships as valuable long-term investments capable of generating consistent returns even during challenging market conditions.
Stable dealership profitability, continued consolidation, and operational improvements driven by AI all contribute to maintaining strong valuations.
Dealer Networks Expected to Become Smaller but Stronger
The survey also points toward ongoing consolidation within dealership networks.
OEM executives increasingly expect their retail networks to consist of fewer but larger dealerships over the next five years.
Nearly 45% of respondents expect the number of dealerships representing their brands to decline.
This marks a significant increase compared to the previous survey.
Only 14% expect dealer counts to increase.
This trend reflects several long-term industry developments:
- Consolidation among dealer groups
- Rising facility investment requirements
- Greater operational complexity
- Increasing technology investments
- Higher customer service expectations
Manufacturers increasingly prefer working with larger, well-capitalized dealership groups capable of investing in facilities, technology, and customer experience improvements.
Facility Requirements Continue Rising
Dealership consolidation is also being influenced by rising facility standards.
Many manufacturers continue introducing updated retail image programs that require dealerships to renovate or rebuild their facilities.
Survey findings indicate:
- 31% expect dealer facility requirements to increase over the next five years.
- 43% say dealerships will need new image facilities during that period.
These investments often involve:
- Modern showroom designs
- Expanded EV service areas
- Digital customer experience upgrades
- Improved service departments
- Sustainability improvements
Although these projects require substantial capital investment, they also create competitive advantages for larger dealership organizations.
Tariffs Create Sales Headwinds
While long-term dealership economics remain strong, manufacturers acknowledge that tariffs are creating challenges for vehicle sales.
Compared with last year’s survey, optimism regarding new vehicle sales has softened.
The percentage of executives expecting sales growth declined, while those forecasting weaker sales increased.
The survey indicates:
- 77% expect vehicle sales to remain stable or improve.
- 23% anticipate declining sales.
Tariffs are considered one of the primary factors influencing this outlook.
Higher import costs have increased manufacturing expenses, creating upward pressure on vehicle pricing.
Combined with affordability concerns and higher financing costs, manufacturers recognize that consumer demand may remain under pressure during the coming year.
OEMs Will Shoulder Most Tariff Costs
One of the survey’s most important findings concerns who will ultimately bear tariff expenses.
Manufacturer executives overwhelmingly believe OEMs—not dealerships—will absorb most of those additional costs.
Survey responses show:
- 58% expect OEMs to absorb the majority of tariff costs.
- 37% believe consumers will bear most of the burden through higher vehicle prices.
- Only 5% expect dealerships to absorb those costs.
This distinction is important because dealership profitability remains largely insulated from direct tariff impacts.
Although vehicle prices may rise and incentives could become less generous, dealerships themselves are expected to maintain relatively healthy margins.
This helps explain why dealership valuations remain strong despite softer sales expectations.
Gross Margins Moving Toward Historical Levels
Vehicle gross margins experienced unusually high levels during the pandemic because of limited inventory and exceptional consumer demand.
Those conditions are gradually normalizing.
According to the survey:
- 56% expect new vehicle gross margins to move closer to pre-pandemic levels.
While profit per vehicle may decline somewhat, manufacturers believe operational improvements—particularly AI adoption—will help dealerships maintain overall profitability.
Higher employee productivity and improved efficiency can offset narrower vehicle margins.
Inventory Levels Continue Recovering
Vehicle inventories have improved considerably since the supply shortages experienced during the pandemic.
Survey respondents expect inventories to continue stabilizing over the coming year.
Approximately 38% project inventories between 30 and 60 days of supply, representing a noticeable increase compared with the previous survey.
Healthier inventory levels provide consumers with greater vehicle selection while allowing dealerships to better meet customer demand.
Dealers Will Continue Owning Customer Relationships
Another major takeaway concerns customer ownership.
Manufacturers continue recognizing dealerships as critical partners in managing customer relationships.
Approximately 86% of OEM executives believe dealerships will either lead or share responsibility for customer relationship management and customer data over the next five years.
As connected vehicles generate increasing amounts of customer information, collaboration between manufacturers and dealerships will become even more important.
AI-powered customer engagement platforms are expected to strengthen these partnerships further.
Right of First Refusal Activity Declines
The survey also examined manufacturers’ expected use of Right of First Refusal (ROFR), a contractual provision allowing OEMs to intervene in dealership sales.
Results indicate manufacturers plan to exercise this right less frequently.
Only 8% expect to use ROFR on more than one-quarter of dealership transactions, a significant decline from the previous year.
Additionally:
- 14% do not plan to exercise ROFR at all.
This suggests manufacturers are becoming more comfortable allowing market-driven dealership transactions without frequent intervention.
OEMs Remain Committed to Electric Vehicles
Although EV adoption has slowed in the United States and several government incentives have changed, manufacturers remain committed to electrification.
Survey participants expect electric vehicles to account for an average of 21% of their total sales within the next five years.
That would represent more than double the current U.S. EV market share.
Several factors support this long-term confidence:
- Billions of dollars invested in EV manufacturing
- Expansion of battery production capacity
- Continued product development
- Global competition
- China’s growing influence in electric mobility
Even though short-term market conditions remain challenging, OEMs continue viewing electrification as a central component of future automotive growth.
Survey Methodology
The 2026 Kerrigan OEM Survey gathered responses from more than 150 automotive OEM executives included within Kerrigan Advisors’ proprietary executive database.
Survey responses were collected between December 2025 and June 2026 as part of the firm’s annual Blue Sky Report®, one of the automotive retail industry’s leading analyses of dealership valuations and market trends.
About Kerrigan Advisors
Kerrigan Advisors is the leading sell-side advisor and thought partner to US auto dealers. Since its founding in 2014, the firm has led the industry with the sale of 450 franchises generating more than $10 billion in client proceeds, including two of the largest transactions in auto retail history – the sale of Jim Koons Automotive Companies to Asbury and Leith Automotive to Holman. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors is the only firm in auto retail exclusively dedicated to sell-side advisory, providing its clients with the assurance of a conflict-free approach. View all of Kerrigan Advisors’ recent transactions here.
