From Energy Waste to Profit Gains: A Cost-Saving Strategy for Dealerships

In today’s automotive retail landscape, dealerships are grappling with unprecedented financial pressures. While the auto industry saw a sales spike in 2024, many dealerships are struggling with plummeting profitability.

According to Automotive News, dealership profits have dropped by 32.4% year-over-year, with rising operational costs, tariffs, and vehicle payment delays continuing to challenge the bottom line.

As George Karolis, President of The Presidio Group, aptly points out:

“We’re surprised that the typical dealership hasn’t adjusted its spending and variable costs as quickly and appropriately as it should have given the decline in profitability over the last two years. This is a time when dealers must be nimble and adjust quickly to the industry’s changing circumstances, and many of them have not.”
— George Karolis, President of The Presidio Group

In this context, intelligent energy management emerges as a key strategy for dealerships to quickly adjust and optimize their operations. By addressing energy costs and inefficiencies, dealerships can better weather external pressures, improve profitability, and position themselves for long-term success.

Energy: the hidden cost center in your dealership

Auto dealerships have distinct energy needs that make them particularly susceptible to inefficiency. Key areas of energy consumption include:

• Showrooms with expansive glass walls and high ceilings, requiring constant temperature regulation to maintain comfort.
• Service bays with frequent door openings and specialized equipment, leading to significant energy waste.
• Office spaces that need to remain consistently comfortable for staff.
• Exterior lots with extensive lighting needs to maintain visibility and safety.

Collectively, these spaces account for roughly 22% of a dealership’s total costs, second only to employee salaries and showroom inventory financing. Yet 60% of dealership managers report lacking a strategic approach to energy management, often running their assets until they fail.

This reactive approach is not only costly but leaves the dealership vulnerable to rising energy prices and unexpected equipment breakdowns.

The financial impact: energy management as a profit driver

The benefits of intelligent energy management extend far beyond reducing consumption. By implementing a strategic EMS, dealerships can unlock a variety of financial advantages:

• Direct energy savings: These savings can amount to tens of thousands of dollars annually, providing immediate financial relief and directly boosting profitability.
• Extended asset life: Properly managed HVAC systems and other equipment last longer, delaying costly capital expenditures for replacements and reducing the need for emergency maintenance.
• Protection against rising energy costs: With utility rates climbing, optimizing energy use helps insulate dealerships from these inevitable increases in operating costs.
• Equivalent sales impact: As an example, for a dealership operating with a 2% net profit margin, a savings of $50,000 in energy costs is equivalent to $2.5 million in additional vehicle sales—substantial savings that can directly improve the bottom line.

Energy efficiency as a competitive advantage

As the automotive market faces disruptions like vehicle tariffs and rising payment delinquencies, dealerships need to find ways to bolster their margins. John Bozzella, CEO of the Alliance for Automotive Innovation, recently noted the financial pressures dealerships will face from tariffs:

"All automakers will be impacted by these tariffs […] and the negative impact on vehicle sales and availability will be felt almost immediately."
— John Bozzella, CEO of the Alliance for Automotive Innovation

As Karolis noted, dealerships that are not agile enough to adjust to the changing circumstances—such as rising costs from tariffs and other external factors—risk falling further behind. Strategic energy management offers dealerships a way to adjust quickly and protect margins.

In addition to financial benefits, sustainability plays a key role in attracting today’s environmentally-conscious consumers. By showcasing a commitment to energy management and sustainability, dealerships can differentiate themselves in a competitive marketplace, attracting buyers who value responsible environmental practices.

Implementing energy efficiency without capital burden

Historically, dealerships were hesitant to invest in energy management solutions due to high upfront costs. However, modern EMS systems are typically offered as subscription-based services, eliminating the need for large capital expenditures.

This shift makes it easier for dealerships to implement energy management without impacting cash flow, allowing them to see positive cash flow from the first month of implementation.

Additionally, common asset management strategies—such as HVAC optimization, automatic bay door installations, and LED lighting upgrades—offer significant returns on investment. For example:

• HVAC asset optimization can result in 20% savings on energy expenditure, plus more in maintenance savings. The program typically pays for itself within the first year.
• Automatic bay door installs can reduce energy loss by an average of 30%, improving both energy efficiency and service bay comfort.
• LED lighting upgrades can yield up to 75% savings on lighting energy costs, with payback periods of up to 5 years, depending on the scale of the investment.

These improvements not only cut energy costs but contribute to a dealership's overall operational efficiency, improving the facility's profitability by driving down avoidable spend.

Energy management as a strategic opportunity

The future of the automotive industry is unpredictable, but one thing is clear: dealerships must adapt. As they face challenges like rising tariffs, declining profitability, and external financial pressures, intelligent energy management systems offer a high-impact, low-risk strategy for improving both profitability and operational resilience.

As George Karolis highlights, dealerships need to act quickly to adjust their strategies in the face of declining profits. By shifting from a reactive to a proactive energy management approach, dealerships can safeguard their bottom lines, extend the lifespan of key assets, and position themselves as leaders in sustainability—creating lasting value for both their business and their customers.