Australia’s automotive industry is navigating a complex landscape as new data from the Australian Automotive Dealer Association (AADA) reveals dealers are operating with thinner margins than many might expect. Despite high turnover figures, the reality for many dealerships is a struggle to maintain profitability amidst evolving market dynamics.
At the AADA event today, Prime Minister Anthony Albanese pledged to introduce dealer protection reforms this year, addressing concerns over unfair trading practices and supplier indemnification. The association’s Dealernomics 2026 report sheds light on why these issues are critical for the sector.
Dealership Economics: The Numbers Behind the Business
The AADA’s data highlights the significant economic contribution of Australia’s 3,868 dealerships, which employ 64,045 people and 7,508 apprentices. The sector generates $91.3 billion in sales, contributes $21.5 billion to economic activity, and pays $8.2 billion in taxes and duties. However, these impressive figures mask the challenges dealers face in maintaining profitability.
According to the AADA’s benchmark model, a $100 million dealership achieves a gross profit of $14 million. After accounting for finance, insurance, and other income, total expenses reach $14.8 million, leaving a net profit of just $3.5 million, or 3.5% of turnover. Employee costs alone consume 56% of gross profit, while rent and floorplan interest add further financial pressure.
Revenue Streams: Front-End vs. Back-End
The breakdown of revenue sources reveals a heavy reliance on new vehicle sales, which account for 72% of turnover. Used retail and wholesale sales contribute 12% and 2%, respectively. Yet, the gross profit distribution tells a different story, with parts and servicing shouldering nearly half of the profit load.
New vehicles contribute 43% of gross profit, while used vehicles add 10%. In contrast, parts and servicing account for 13% and 34% of gross profit, respectively. This underscores the importance of back-end operations in supporting dealership profitability, particularly in the face of disputes over warranty reimbursements and consumer-guarantee costs.
Consumer Sentiment and the Shift to Electric Vehicles
The AADA’s electric vehicle (EV) consumer sentiment survey highlights the challenges facing the transition to EVs. With 65% of respondents planning to keep their current vehicles longer due to cost-of-living pressures, and only 38% open to buying an EV for their next main vehicle, the demand remains patchy.
“The average price premium consumers are willing to pay for an EV is just 2.0%,” the survey notes, with 60% of respondents calling for more government incentives to encourage EV adoption.
Barriers to EV adoption include high costs, inadequate home charging setups, and insufficient public charging infrastructure. These factors, combined with concerns over driving range, recharge times, and resale values, contribute to the slow uptake of EVs in Australia.
The Aging Vehicle Fleet and Market Implications
The reluctance to embrace EVs is reflected in the used-car market, where petrol and diesel vehicles dominate sales. In 2025, used EVs accounted for just 1.5% of the market, highlighting the slow pace of change in Australia’s vehicle fleet.
The average age of passenger vehicles rose to 11.3 years, with light-commercial vehicles averaging 11.6 years. This aging fleet suggests that Australians are holding onto their cars longer, adding complexity to the market as dealerships navigate thin margins and evolving consumer preferences.
Looking Ahead: Challenges and Opportunities
James Voortman, AADA’s chief executive, emphasized the broader implications for the industry. “As local new car dealers are squeezed, it will ultimately be Australian customers who pay the price through less investment in local jobs and reduced access for regional communities,” he stated.
Voortman also highlighted the proliferation of auto brands in Australia, noting that while 28 new brands have entered the market in the past five years, this has not translated into increased profits for dealers. “If this trend continues, we certainly don’t want to end up in a situation where we’re seeing dealerships closed, and local jobs lost,” he warned.
As the automotive industry grapples with these challenges, the focus remains on balancing profitability with the need to adapt to changing consumer demands and regulatory landscapes. The path forward will require strategic adjustments and continued advocacy for fair trading practices to ensure the sector’s sustainability.
