As we move into 2025, AI and machine learning (ML) are set to transform automotive retail. Beyond customer interactions, these technologies are reshaping dealership inventory management, pricing, and operations. In 2024, AI expanded into back-office functions like credit processing and identity verification. This year, it will be deeply integrated into inventory management and operations.
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It’s The Rise of The Inventory Data Platform
Dealerships will use the Inventory Data Platform—which blends AI, ML, and big data—to stock the right mix of vehicles at the right time and avoid overstocking slow-moving models. For example, Agentic AI helps manage leads by detecting when a lead remains active after a vehicle is sold and suggests alternatives to re-engage potential buyers with relevant inventory. Lotlinx Sentinel uses 12 years of data to predict inventory risk, lower wasted promotion, and promote each VIN to improve sell-through rate and speed up sales.
These platforms also tackle operational problems like duplicate leads. With about 80% of leads often duplicates on the same unit, Agentic AI detects active leads in-market and identifies alternate in-stock units to retarget. Ultimately, AI for automotive dealerships brings “dead” leads back to life.
Operations Will Be Exclusively Driven by AI
AI and ML will drive improvements in dealership operations in 2025. Predictive analytics will optimize inventory and help manage carryover and risk by detecting potential slow-moving vehicles early in their sales cycle. Dealers can then adjust pricing, launch specific marketing campaigns, or facilitate transfers to maintain high turnover.
Perhaps one of the most exciting applications of AI this year will be in vehicle pricing and markdown strategies. AI can recommend best pricing beyond blanket markdowns for new and used vehicles, responding in real-time to market conditions, competitor actions, and individual vehicle attributes. Sophisticated markdown approaches will be tailored to each vehicle to maximize sales velocity and profitability.
Digital Transformation Will Quickly Accelerate
Dealerships will invest heavily in platforms offering a seamless car-buying experience online, from browsing to financing and delivery. Investment in these platforms will be a “cost of doing business” and may not generate significant sales upticks. These platforms will integrate CRM, DMS, inventory, Google Analytics, and CDP into one system where machine learning continuously analyzes data 24/7.
Predictive analytics and AI tools will help tailor marketing efforts, automate their automotive inventory management systems, and improve customer service. The largest payoffs will come from leveraging AI tools to automate operational tasks so these tasks are performed with higher certainty and consistency. Dealers can expect these systems to either automatically perform these tasks or provide data-driven advice over traditional reports.
Although Inventory Levels Are Better, There is an Imbalance Across Brands
Despite improved overall inventory levels, imbalances across brands will persist. Brands like Toyota and Lexus will maintain lean day supplies, while Stellantis will likely continue with high supplies. Dealers must strategically manage these imbalances using AI-powered tools to acquire, price, and sell vehicles.
The robust used car market will face challenges with luxury and larger vehicles. Dealers will need to focus and rely heavily on certified pre-owned (CPO) programs to attract budget-conscious buyers despite off-lease vehicle shortages.
New day supply is expected to keep increasing with high disparity between brands. Toyota and Lexus will maintain tight day supplies, while Stellantis operates with much higher levels. Meanwhile, used car day supply is projected to remain tight and steady throughout 2024.
Economic Pressures Are Still Prevalent
2025 will be marked by economic pressures that could impact vehicle sales. Higher interest rates will make financing more expensive, pushing consumers toward longer loan terms or leasing options. Rising operational costs like labor and energy will narrow profit margins and increase pressure on marketing costs.
Dealers will likely pressure Original Equipment Manufacturers (OEMs) to offer competitive incentives, address aging inventories, and better align vehicle configurations with consumer affordability demands. Shareholders will also hold OEM leadership to higher standards of responsiveness to current economic conditions.
Consumers Are Demanding and Expecting The Dealer to Provide Better Customer Experiences
Consumer expectations will continue to evolve in 2025, demanding more personalized experiences and greater convenience. Dealerships will need AI and ML tools that combine their DMS, CRM, and inventory data to accurately target buyers at various stages of their buying journey. These will need to optimize ad spend and craft relevant messaging.
Growth Expected For Hybrids and EVs
The electric vehicle (EV) market is set to grow, accounting for 20-25% of new car sales in the U.S., up from around 12% in 2024. Declining battery costs, expanded charging infrastructure, and federal/state incentives will drive this growth. Dealers need to prepare for increased demand while seeking opportunities in hybrid and plug-in hybrid electric vehicles (PHEVs) that offer fuel efficiency and gasoline engine flexibility for long trips.
Solution: Adapt & Learn
The 2025 automotive market will be shaped by rapid technological advancements and shifting market dynamics. Dealerships that harness AI and ML to streamline operations, optimize inventory, and personalize experiences will be well-positioned to thrive. Success pushes dealerships to go beyond the typical technology investments. As a collective, dealerships should aim for a data-driven culture where decisions are informed by real-time insights.
2025 promises to be a big year for automotive retail, with exciting opportunities for those ready to embrace the future. See more about Lotlinx’s 2025 predictions in our newest infographic.