April 22, 2020

COVID-19 Recovery and What It Means For Auto Dealers

By Daniel Kim, CEO of Orbee Auto

As we’re in the middle of complying with state stay-at-home orders during the COVID-19 pandemic, we continue to see an accelerated shift of consumers turning to home delivery and online buying. The automotive industry is no exception, as most auto dealerships have closed their physical stores and are relying on digital retailing and online sales as well during this time.

Despite most auto dealership store locations closed during COVID-19, we’re seeing that a lot of dealerships are still able to meet the needs of a customer by offering online services. For example, customers are able to negotiate and do paperwork online or over the phone at the comfort of their homes. Our clients such as Lithia Hyundai of Reno and Motor Inn Auto Group are one of the many dealerships who offer the option to negotiate the deal remotely and have the vehicle delivered to their customer’s doorsteps.

Dealerships will see more success in having a process to handle diverse customer needs

Dealerships have been quick to adopt digital retailing tools such as Roadster and Drive Auto for their dealership website as traditional ways of doing a deal at the dealership’s physical location has become impossible due to stay-at-home orders. Digital retailing will be an important part of your online presence, but it is important to understand that the stay-at-home orders are causing customers to not be able to go to your physical location, but NOT changing their shopping behaviors. The shoppers who need to negotiate on the offer, shop their deals, or just don’t feel comfortable agreeing to the initial offer from the dealership might find that digital retailing is not suitable for them even during the stay at home order.

We have to remember that the vast majority of shoppers still want human interaction when it comes to talking, negotiating, and discussing a deal with a representative at the dealership albeit this might have to be done with social distancing in mind such as over the phone or chatting online.

Having a digital retailing tool ready for your customers is important, but more importantly, having a process where you can handle the diverse needs of your customers is much more important in contributing to the success of your dealership during these times. We found that the dealerships that are most successful are the ones that have a great process with their teams in place in order to serve their customers remotely. This means that these dealerships are willing to communicate transparently with the customer, willing to negotiate the right deal without a lot of friction, willing to deliver a new car purchase to the customer’s doorstep, and more, all done remotely. And after all, all you need is a phone and a website to sell your cars online.

What we expect to see post-COVID-19

There are two things that dealerships will need to watch out for after the initial wave of COVID-19: the progress of COVID-19 and the macroeconomic effect COVID-19 will have on the automotive industry.

After the initial surge of cases in COVID-19, the number of new cases will subside, but the challenge is that we will be heading back into the flu season by the time the bad wave begins to subside, and one of the big questions will be if we are going to see a surge of it again (Dr. Bruce Aylward, TIME). While still uncertain in where the U.S. stands six months from now, auto dealers should take this time now to build and strengthen the foundational processes at their dealerships.

In addition, despite seeing and possibly anticipating further declines in showroom and online traffic for the auto industry, Automotive News Data Center sees that there emerges a clear and pragmatic tone that the coronavirus will pass and that auto dealers will begin to explore more ways to drive sales. Automotive Data News also found that 17% of auto dealers see opportunity for growth in used car supplies after COVID-19. As for customer sentiment, NADA saw consumer confidence drop to 89.1, an 11.9 index point drop from February’s reading of 101, and the fourth largest decline in nearly half a century. However, we have hope that consumer confidence will increase and consumers will be ready to purchase vehicles again once stay-at-home orders begin to lift and consumers return to work.

After the stay-at-home orders expire, we’re predicting that there will be an uptick of demand to buy cars as there may have been cases where leases on 1.8 million vehicles are set to expire between March and July according to data from J.D. Power, and most of these customers will be in the market for a replacement vehicle. We also predict that there will be more foot traffic at physical store locations once the stay-at-home orders get lifted as people may want to actually come to the dealership after being cooped up in their homes for the past couple of months.

In the longer term, there will be a period of uncertainty in the automotive industry, and this will require our dealerships to have a strong process in being able to face the various economic and COVID-19 scenarios. Also, dealerships will need to have the ability to quickly pivot with their marketing efforts to ensure that we are delivering the right messaging, targeting the right customers, and spending the right budgets.

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