At the end of each year, it’s healthy to take a few moments to reflect on your accomplishments. And to do so with a healthy dose of humility as you score how well you performed on your 2023 predictions…
Prediction 1: Reynolds & Reynolds Acquired.GRADE: F
Fail. With the passing of industry icon Bob Brockman in August 2022, and uncertainty around how Brockman’s $2 billion tax evasion case with the U.S. Government will be resolved, we figured there might be a sense of urgency for his estate to get this matter settled so proceeds can be divided up amongst Brockman’s heirs. But that certainly doesn’t seem to be the case.
Prediction 2: Tekion Acquired by Salesforce.com. GRADE: F
Fail. Tekion, a darling of the automotive SaaS segment, is taking on the oligopoly of Reynolds & Reynolds and CDK Global. The company raised $250 million at over a $3.5 billion valuation back in October 2021. We thought Salesforce might acquire Tekion to provide a fast path for the public juggernaut to enter both the DMS and CRM segments. We were wrong.
Prediction 3: Carvana Acquired by Amazon. GRADE: F
Fail. I’ve believed for years that Carvana would be a natural acquisition target for Amazon. Given Amazon’s recent announcement with Hyundai, it seems like they are planning on focusing on new vehicle sales. At least for the time being…
Prediction 4: AutoTech Valuations Reset. GRADE: A
Bingo! 2023 saw valuation correction for private companies in earlier stages of funding rounds. Many companies were forced to do insider-led rounds at their last valuations, while waiting for markets, investors and valuations to comeback to life.
Prediction 5: Dealership Valuations Drop. GRADE: C
Meh. We expected that the higher interest rate environment would cause acquisitions to dramatically slow, but dealer profits remained strong and buy/sell activity continues at a healthy pace. Dealer valuations are only slightly off their recent all-time highs, but we expect valuations to continue to drift downward as we regress to more “normal” years for profitability.
Prediction 6: Dealers Focus on Cost Reduction. GRADE: C
Meh. Auto dealers are coming off three record years, and profitability is only just starting to drift downwards (we’re still far above pre-Covid levels). As a result, dealers haven’t been too focused on taking costs out of their operations. Yet.
Prediction 7: Artificial Intelligence (AI) Goes Mainstream. GRADE: A
Bingo! In 2023, you couldn’t avoid reading a headline about AI. If 2023 was the year when AI became accessible to the general public, 2024 will witness AI permeate into the software and devices that people use daily. 2024 will be the year where we'll start to see more and more real-world applications as AI becomes ubiquitous.
Prediction 8: Next Wave of AutoTech: Process Automation. GRADE: C
Meh. We strongly believe that the next wave of automotive tech will help dealers and OEMs automate processes and reduce costs. In many cases this will be by reducing vendor cost and complexity, reducing headcount, and/or making existing headcount far more efficient. But without a need to aggressively remove costs from operations, 2023 was not the year.
Prediction 9: Consolidation of Mobility Companies. GRADE: C
Meh. Historically, an unprecedented amount of capital flowed into mobility, pursuing autonomous driving, the electrification of vehicles and infrastructure, and vehicle connectivity. But many startups struggled to raise new capital. Mobility companies that went bankrupt or out of business in 2023 include Bird, Wejo, Volta trucks, Proterra, and Lordstown Motors.
Prediction 10: Private Equity (PE) Acquires Public Companies. GRADE: D
Meh. What a difference a year makes. A year ago, the market cap of several public mobility tech startups was below the level of cash on their balance sheets, leaving them vulnerable to takeout and liquidation. But no one was prepared for a historic bull market in 2023, which left little time for financial players to pick off undervalued public companies.
Bonus Prediction: 2023 - The Year of the EV. GRADE:A
Bingo! If there was one hot topic in the news this past year (other than Elon Musk and AI) it was the electric vehicle (EV). Softening consumer demand, overproduction, inventories backing up, discounting, legacy automakers adopting the Tesla charging standard, Chinese battery restrictions and the politicizing of EV vs. ICE. There was something here for everyone.