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Erin Kerrigan Breaks Down the 2026 OEM Survey and Buy-Sell Market

• Jim Fitzpatrick

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Erin Kerrigan, Founding Partner and Managing Director of Kerrigan Advisors, joins Inside Automotive to discuss the firm’s 2026 OEM Survey, the state of dealership buy-sell activity, and the trends shaping the future of automotive retail.

Drawing on insights from 155 OEM executives, Kerrigan explains why dealership acquisitions remain near record levels, how valuations continue to diverge between high-performing and underperforming franchises, and what consolidation could mean for retailers. She also examines the growing role of artificial intelligence, Carvana’s expansion into new-vehicle sales, and the impact of tariffs, EV adoption, and global competition on the industry. The conversation also highlights Hendrick Automotive Group’s acquisition of Foreign Cars Italia, one of the year's most notable dealership transactions.

Key discussion points:

  • Findings from Kerrigan Advisors’ 2026 OEM Survey
  • Why dealership buy-sell activity and valuations remain strong
  • The emergence of a “K-shaped” market for franchise values
  • How AI and Carvana are reshaping dealership profitability and operations
  • OEM expectations for tariffs, EV adoption, and network consolidation
  • The significance of Hendrick Automotive Group’s acquisition of Foreign Cars Italia

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Headlines Shaping Auto Retail

Jim Fitzpatrick

Welcome to Inside Automotive with Jim Fitzpatrick. There's been no shortage of headlines lately around dealership buy-sell activity, valuations, and the future of automotive retail. Kerrigan Advisors has also released the 2026 OEM survey offering a look at how automakers are thinking about the road ahead, coupled with the firm's recent work on a significant multi-dealership transaction that many of you already heard about uh in the Carolinas. There's a lot uh to unpack here. So, Arigan Aaron Kerrigan, thank you so much for joining us on the show once again.

SPEAKER_01

Thank you, Jim, for having me. It's always fun to talk shot.

Jim Fitzpatrick

Sure, sure. So you guys just released your 2026 uh Kerrigan OEM survey with uh over 150 responses from OEM executives. By the way, kudos to you because to get OEM executives to respond anything is a feat by itself. So thank you for uh getting them to respond. But uh overall, what's the headline takeaway from this year's survey?

SPEAKER_01

Well, you know, it it's all it's largely positive. So that's uh especially for the car dealer, a little less positive for the for the OEMs, interestingly. And we are really honored that we could get actually had 155 OEM executives that responded to our survey. We're told this is unheard of and it's really a one-of-a-kind. It's our third annual. And in fact, every year that we're doing it, we're getting more responses, which is surprising to us and exciting to us because uh they have an interesting purview. If you think about it, these folks aren't surveyed very often. And yeah, we're fortunate because the Blue Sky report goes to 16,000 people in 35 countries that we have most of the OEM executives' contact information because they request the Blue Sky Report. So we were able to tap that uh that network to ask these questions. And largely they really do see the the dealer maintaining a very central and vital role in the industry. We don't see any indication that the OEMs expect to go direct to consumer. That was certainly something we lots of folks were concerned about a few years ago. And uh the survey results very much are an endorsement in our view of the future of the auto retail network, the dealer network. And

OEM Survey Signals More Buy Sells

SPEAKER_01

they also talked about buy sell activity. So uh we do expect that they have a pretty interesting purview, right? They see all the buy buy sells and they absolutely they do see uh they do see buy sell activity increasing largely.

Jim Fitzpatrick

So continued high level of buy sell activity?

SPEAKER_01

Yep, that's exactly right. So 88% of OEM executives expect buy sell activity to either hold steady at today's record rates or even accelerate. Wow. So uh 35% of them actually think that we'll have more buy sell activity in the next 12 months than we've had in the last 12. And again, the last 12 were an all-time record. So pretty, pretty uh big endorsement for continued consolidation. And we are definitely seeing that play out in the marketplace. In our first quarter, Blue Sky report, we saw a 21% increase in transactions compared to the first quarter of 25. And on a trailing 12-month basis, that meant we were tracking to 478 transactions. We think we'll end the year at 500, and that would be an all-time record for the industry. That is now the other thing just to point out is we're also seeing more multi-dealership transactions. That actually rebounded 36% quarter over quarter. So that's a big increase. And that's part of the reason we saw such a big rise.

Jim Fitzpatrick

Yeah. So

Inside The Hendrick Exotic Deal

Jim Fitzpatrick

speaking of multi-dealership transactions, you guys uh have been in the press lately for your big multi-uh dealership transaction in the Carolinas. Talk to us about that.

SPEAKER_01

Yes, we're very fortunate to represent Benny Yaunt and the Yaunt family in the sale of Paramount Automotive's Foreign Cars Italia platform in Greensboro and Charlotte, North Carolina. And that included two Ferrari franchises, one in Greensboro, one in Charlotte, Porsche in Greensboro, as well as a lot of the exotic brands, Bentley, Aston Martin, and some others. And I will say it was such an honor because we sold that group to the Hendrick Automotive Group. And this will be their first entry into the exotic market and of course their first Ferrari franchise. Now, Mr. Hendrick owns well over a hundred Ferraris. So I joked with him that he he needed to buy a Ferrari franchise. He was already a big, big customer of the Yaunt family and and and Benny Yaunt. So um, in fact, I'm pretty sure he has the largest collection of Ferraris worldwide. Wow. So it's very exciting. And actually, that transaction closed, and we had a closing dinner in Mr. Hendrick's amazing museum. And then he gave me the opportunity to interview him uh for a podcast series that we are launching called Beyond Blue Sky. And our podcast is really where we're interviewing mostly our clients, but in some cases, in this unique case, also the buyer, Mr. Hendrick. Okay. And we're interviewing folks about the transactions and and and beyond the numbers, the emotions associated with them, how the stories of how our clients got to the point of selling their business, uh, and and the nuances and the and the the personal stories of of being in auto retail and a lifetime in auto retail. And Mr. Hendrick did not disappoint. We interviewed him in the middle of his car museum, and I can't wait to to have that podcast published because it's it was it was sort of a it was a pinch me moment for me personally and and and a career high for me.

Jim Fitzpatrick

He came out of the gate with a pretty big name there. I mean, it's good you set the bar pretty high for yourself with uh future podcasts and guests.

SPEAKER_01

I I that I guess that is true. Um

The K Shaped Valuation Market

SPEAKER_01

this transaction, I I I will say really was indicative of the market that we're seeing. It's really this K-shaped market, we like to say, in the auto retail market, like they talk about in the economy.

SPEAKER_02

Yeah.

SPEAKER_01

We're definitely seeing uh the the strongest franchises in great markets like Charlotte and North Carolina demanding tremendous values. And those that are maybe not as strong franchises and maybe not in great growth markets, not seeing the same kind of buyer demand and and and their values in some cases are are are are actually declining. So we're we're definitely have a much more diverse buy-sell market. It's not like during the during the go-go years of COVID when all votes were rising and everyone was doing great. Now we're definitely having haves and have nots.

Jim Fitzpatrick

Yeah, yeah, for sure. How's all of this impacting valuations?

SPEAKER_01

Well, as you can imagine, the haves are hitting record numbers. I mean, you look at in Q1, the public spent $790 million on transactions. That's up from $154 million. Now, that was largely because Penske spent about $670 million on two Lexus franchises in Orlando, and that is the highest price ever paid for two dealerships. So for franchises like that, those unique assets, we see the biggest consolidators really entering into a chess game to say, okay, I have to have these assets, and they're only there's a finite number of them. And so the values are tremendous. On the flip side, you see values for for let's say um an Eisson franchise and a weaker market. I mean, those are having a hard time commanding any value in some cases. So especially if they're not making money. So there is really a bifurcated marketplace. That being said, there's so much demand for those top franchises that we are seeing them lift up the valuations in the industry. So we we see valuations continuing to tick up on average. And on average, the the valuations per our blue sky index are about 78% higher than they were pre-pandemic. So um it is positive. The OEM survey, by the way, uh does echo that same data. 82% of OEM executives expect blue sky values to either hold steady at today's high rate or increase. In fact, 21% think valuations are going to increase in the next 12 months, and fewer are expecting valuations to decrease. In fact, only 18% of OEMs expect blue sky values to decrease in the next 12 months, and that's down from 25's results when 22% thought that they would decrease. So we are definitely, and keep in mind the OEMs see all the values, right? So they they they see what these deals are being contracted at. There's um so that they have a pretty good purview, and it it appears to us that all and all valuations are on the rise.

Jim Fitzpatrick

Okay. That's great news. That's great news.

AI And The Next Profit Model

Jim Fitzpatrick

On the topic of valuation, did the OEM executives in your survey have any expectations of AI's impact on dealership valuations and profitability? I mean, we hear so much about AI, it's making such an impact in in uh in every business, but specifically the auto retail businesses, you know.

SPEAKER_01

No, well, it's it's so interesting. So we did ask them that. We asked that, we asked them specifically, what do you think AI's impact's gonna be on future on future dealership profitability? 59% think it will increase uh dealership profitability.

Jim Fitzpatrick

Only 4% for what reason? Because it will reduce headcount or overall expenses or just better efficiency running. Exactly.

SPEAKER_01

Exactly. So AI is expected to reduce the cost of operating a dealership and enhance the ability of auto retailers to capture more sales when implemented effectively. And if you think about it, in our dealer survey last year, 90% of dealers say they are either using AI or planning to use AI. So this is happening right now.

SPEAKER_02

Yeah.

SPEAKER_01

One of the things we talked about in our last Blue Sky report is we talked about that we are starting and expect to continue to see buyers starting to pro forma future earnings in an acquisition to improve because most deals are priced on historical earnings. Yeah. Well, the historical earnings had no AI. The future earnings are gonna use AI. And that means that they should see higher margins, at least in the short term. Now, ultimately that might get competed out such that mar that gross margins come down. But for a period, you're gonna see we expect, and we're seeing buyers starting to expect higher earnings in our industry as they implement AI. I mean, you look at group one, you know, they did a major cut of their workforce and they spoke about AI-driven efficiencies they're expecting. And that's part of the reason they were confident enough to do that uh major workforce reduction. And then you also look at Carvana. I mean, Carvana is an AI-enabled model. They are now in our industry, and they have grown retail sales 91% year over year. So they're demonstrating the power of technology to enhance market share. And obviously, the Wall Street and investors believe in that because they're worth $80 billion and their market cap exceeds all six public auto retailers now that they're in our industry, in our new auto retail side.

Carvana Changes The New Car Playbook

Jim Fitzpatrick

Yeah. To your point on Carvana, what are your thoughts on Carvana's entry into the new auto retail side with their Stellanus stores and some of the very unique things that they're doing to sell vehicles with uh at at high volume levels, I might add.

SPEAKER_01

I mean, they really have blown the cover off the ball if if you look at their unit sales. It's it's it's really pretty startling.

Jim Fitzpatrick

Really obviously no question about it. And their cube inside the showroom that, you know, kind of a self-serve deal. I mean, it's they're doing some pretty innovative things that have really got many automotive retailers and OEM executives taking a very, very close look at.

SPEAKER_01

I actually even asked Mr. Hendrik about this, and he say he didn't poo-poo it. He was like, we need to look at that, look at what they're doing, understand it. I mean, it's interesting. Their first acquisition was in Casa Grande, Arizona, about 50 plus miles outside of Phoenix. It's in a rural, it's it's nowhere near Metro. This little store was selling, this Atlanta store was selling 35 cars a month. Last month in June, they sold uh almost a thousand new cars. Wow. They have no general manager, I am told. They have very few, they have a handful of sales uh uh consultants. Yep. So to put it in perspective, if they continue at that rate, they will be the second highest volume franchise of any franchise or any dealership in the country behind Longo.

Jim Fitzpatrick

Right. And how long have they been in the new car business?

SPEAKER_01

About a year. Right. About a year.

Jim Fitzpatrick

It's unbelievable what they have applied. That you know, their practice, their business practices applied to retail uh uh um retail automotive has just been astounding.

SPEAKER_01

And and it really demonstrates the power of technology and the potential for a single store to cover a much larger market area.

SPEAKER_02

That's right.

SPEAKER_01

If the OEM will let them, if the OEM will let them effectively blow up the AOI or the PMA, yeah, yeah, and and use a point to reach all of the a metro and beyond, they're demonstrating that that the geography is not the limitation to the to to their sales model. So it's it's definitely something I think every car dealer should be studying and understanding, and we're certainly doing that because you know, like it or not, they're proving something out. Just like Tesla proved out, not like it or not, they sold a lot of cars, obviously without a dealer network. We don't think that's the right way to do it. It's not the right way to serve their customers, but they did demonstrate they could sell a lot of cars that way.

SPEAKER_02

Yes.

SPEAKER_01

It's it's not, again, the right way to service the customers. I think they're finding that out. But the technology and the way in which Tesla sold without without salespeople and what have you, is is eye-opening. And I think we all as students of the industry need to really take a look at this.

Jim Fitzpatrick

Oh, no doubt. There's no question. We we keep being amazed by some of these outsiders, these disruptors that come into retail automotive, CarMAX, you know, 30 years ago. We're like, who's gonna buy a used car and not want to negotiate on it, right? I mean exactly. I mean, I think we learned a lot. We we keep learning from outsiders that come into the automotive industry and we go, oh, who's gonna want to buy a car from a vending machine? Nobody's gonna want to buy a car and have it shipped to them if they didn't drive it already. That's that deal's just not gonna work. It's a fad. I was part of that crowd, you know, as many dealers work because we built these incredible dealerships and we felt people want to come in and they want to spend some time with the salesperson and they want to kick the tires, so to speak. And boy, were we wrong, right? And now we're hearing once again from this disruptor, this outsider, that they know how to sell new cars as well, maybe in a better way, a more efficient way than these 18,000 car dealers throughout the country. So I agree with you. I think we could all take a page out of their book, right?

SPEAKER_01

I I think it's just important to see for sure. And I think it's naive to not think that the other OEMs beyond Stilantis are looking at this because at the end of the day, this Carvana is moving the needle for Stilantis, and for other OEMs, that might be highly appealing.

Jim Fitzpatrick

I uh and it comes at a time, as you know, that you know, franchise laws are are trying to be tightened through you know in the states across the country because we're seeing these disruptors again, um uh like Valve or um Volkswagen with Scout and of course Tesla and Rivian and others. So, yeah, yeah, I'm sure that if you're an OEM executive today, you're thinking, hmm, this is an interesting concept here that you know that Carvana is uh uh showing us. And uh so yeah, I I think we all need to take a look at this and uh and see how we can how we can work with this. Maneuver, I should say, maybe pivot where we have to. But uh because we all know that at the end of the day, those cars, whether it be on the new car side or the used car side, they're no different vehicles than what the 18,000, 17,000 car dealers around the country are selling. It's just a different way to move that product to consumers. And with new generations of consumers that, you know, that have do everything on their phone, you know, maybe that is uh connecting with them. Well, certainly it is connecting with them in so many ways.

SPEAKER_01

Yeah. Well, and interestingly, one of the survey questions we also asked is um do you expect to have fewer, more, or the same number of dealers in your network in the next five years? And 45% of OEMs said they thought they'd have fewer.

Jim Fitzpatrick

Fewer, 45%, fewer.

SPEAKER_01

Well, 45% of the other. Well, there you go.

Jim Fitzpatrick

They're telling you right there. Yes, we're gonna have fewer.

SPEAKER_01

Yeah. What they're saying is we're gonna see more consolidation.

SPEAKER_02

Yeah.

SPEAKER_01

Uh and and they're not saying they're not gonna have dealers, they're just saying, I think what that really speaks to is fewer larger dealership groups. So, in other words, like if Carvana can sell a thousand units a month, maybe you don't need as many points, right? Because so I think that it's it's consistent with the theme of what we've seen with Carvana. I also think it's consistent with the other thing we asked them is, you know, do you expect to require a new facility? And 43% expect in the next five years they're gonna require a new image facility.

Jim Fitzpatrick

So I don't mean to put you on the spot here, but if you get a phone call from a dealer that is the competing dealer, the competing Stellanus dealer to Carvana in their market, is their dealership gonna be worth less today than it was two years ago because they've got this 900-pound gorilla to contend with?

SPEAKER_01

It depends if that dealer is also employing some of these tools, because it's not Carvana is not unique. I mean, Carvana is unique, and yet it's not to say that others cannot have that same impact. I think in some regards, Carvana's growing the market. I mean, one could argue now there's more UIOs, right? So the the dealers are benefiting from more service, more units in operation. If you're a Stillanis dealer in a market where Carvana is selling, the new car market might be more challenging, but you really you are growing the pie of market share in the market. So I think it's it's not a simple yes or no question. Yeah, but I do I do think that Carvana is is certainly shown us a lot about how things could change in the next in the next um you know few years here. And AI is part and parcel of that as well.

Jim Fitzpatrick

Yeah, sure. So

Tariffs EV Expectations And China

Jim Fitzpatrick

as we close out this segment, um, final question. What was the most surprising or the surprising element to you about the survey results?

SPEAKER_01

Well, there are a few things. First, I thought I think you guys are gonna think this is really interesting. 58% of OEMs expect executives expect that the OEM will absorb the tariff cost. 37% expect the consumer will, and just 5% expect the dealer will have absorb the majority of the cost. So it really is indicative of the fact that our uh we the dealers are in a really strong position, even with some of the rising expenses, the rising prices of vehicles, the dealer's the middle band. They're always gonna make a market. And I I just thought that was really interesting that that that they themselves said we're we're gonna absorb this cost. Right now, I think it was in it you also saw them say we expect a decline, 23% expect a decline in new vehicle sales, and that was up from 18% last year. So that probably plays into this affordability, the pricing, and and everything they're dealing with. Uh and the last thing I thought was super interesting is um 21% expect um pardon me, twenty-one percent expect that they will see that they will see I'm sorry, 21% of them of their sales they expect to be EVs in the next five years. And that's up from eight percent. So they expect to have 21% market share of EVs for their OEM in five years.

SPEAKER_02

Okay.

SPEAKER_01

And that's just a big increase from where where you are now. So they have not given up on EVs. EVs are still there.

Jim Fitzpatrick

Oh, yeah.

SPEAKER_02

Yeah.

SPEAKER_01

Um they they are projecting and they are still on the EV bandwagon. So I I thought those were all just really interesting additional anecdotes and data for our industry to to contemplate as we chart the course for the remainder of 2026.

Jim Fitzpatrick

All right, that wasn't my last question. One more question. Um was there anything in your survey about the plausibility of Chinese vehicles being sold in the US from the from the OEM standpoint? Are they this is a whole other show, by the way, right?

SPEAKER_01

I'm embarrassed to say la last year's survey we asked the question, and this year we didn't because we felt like it was I don't I'm I'm actually not even quite sure why we didn't include it this year, but we did ask it last year. Full disclosure, maybe that was it. But um last year, a significant percentage of OEMs expected the the Chinese to enter the market.

Jim Fitzpatrick

Really?

SPEAKER_01

Okay, um, I don't remember the exact percentage, but I will also share with you okay, they also a significant share said that it is a problem and a concern to their OEM, the the their lag legacy OEM, because we don't have any Chinese OEMs in our database, I don't think.

SPEAKER_02

Yeah.

SPEAKER_01

So I don't think they were included in the survey. A significant number of legacy OEMs think the rise of Chinese market share globally is a major issue financially for their OEM.

Jim Fitzpatrick

Okay. I want to have you back on to talk just about that issue because I think it's it's I would love to.

SPEAKER_01

It is something we've been talking about for three years now at Care Advisors and our Blue Sky Reports. We've been saying like this is a big issue. It's not on our shores, but it is impacting each of our OEMs dramatically. If you look at VW, they're having the largest, the largest cutback in employment at that organization maybe since the the wars. And and a hundred thousand people are gonna lose their job in Germany. That is a big deal for that company. And and it is something that every legacy OEM is dealing with because China is taking major global market share. I was just in Europe, and the and the number of BYDs you see is shocking.

Jim Fitzpatrick

It is, yeah, there's no question about it. And as I said, it's a whole nother show. It was Ryan that introduced uh Michael Dunn to us here at CBT News. We've been talking to him ever since. So thank you for that connection. But uh so I know you guys have been at the forefront of this story for a long time and and this situation, so thank you for that. But uh Aaron Kerrigan, the founding partner and managing director of uh Kerrigan Advisors, thank you so much for joining us on the show once again. I know our dealer viewers get a lot out of your visit with us, so thanks so much.

SPEAKER_01

Thank you so much, Jim. Have a great summer.

Jim Fitzpatrick

Thanks for watching. Inside automotive with Jim Fitzpatrick.