Dealers Struggle While Crickets Chirp
Updated: 7 hours ago
It is 2020, and we live in unprecedented times. Our society faces a viral epidemic, leaving everyone unsure of the future. We've all changed our lifestyles to adapt to the new "norm." Everyday activities have changed; schools are teaching remotely, employers are operating remotely, consumers are ordering out meals rather than dining in. The largest lesson is that most daily tasks can now be done entirely contact-free, contradicting previous assumptions. However, some industries are postponing the transition and hoping for society to return to a state similar to that before COVID-19.
The impact of COVID-19 has been felt in every corner of the economy, including new car sales. The car sales industry is directly impacted by customer hesitation and is often the first to be affected by a stagnant or failing economy. As a result of the virus, the United States saw a drop in vehicle sales; in March the decrease was 39%, and April sales fell by 52% from 2019. (BCG, 2020). The Detroit Manufacturing Giants (GM, Chrysler, and Ford) have suffered from the epidemic of COVID-19. Others have proved to be profitable, particularly more progressive manufacturers such as Tesla.
Tesla has increased its sales by 154.7% in the third quarter of 2020 compared to the third quarter of 2019. This proves growth is possible during a pandemic (GCBC, 2020). Several factors shape this claim, such as fulfilling orders placed the previous year, new product introduction, and production increase to meet demand. However, another factor that contributes to this division in the industry is Tesla's purchase process. Traditional manufacturers expect customers to walk into a dealership to purchase their vehicles; buying a vehicle from Tesla can be done entirely online.
Consumers have shown that they want less time in dealerships. In a recent poll, 72% of customers said they would visit dealerships more often if the buying process was streamlined, 56% would buy more cars if the process was easier, and 90% would prefer starting the buying process online (V12, 2020). The entire new vehicle purchase process is lengthy and can take several hours. These time-consuming processes include obtaining financing, discussing warranties, reviewing figures, and detailing the car -- all of which can either be done online or before the vehicle's delivery.
Some dealerships have begun making moves toward a more digital buying experience, allowing customers to conduct the majority of the process online, but the process is full of flaws. Traditional dealerships have not changed anything, simply digitizing the analog process of buying a car. The solution is very straightforward; reinvent the car buying process and design it for an entirely online buying experience. Tesla has proven that it is possible, but they are an established corporation with expendable funds, a luxury unavailable to many dealerships. For the industry to change, manufacturers need to become more involved in how their dealerships sell their vehicles or allow new organizations to reinvent the car buying process to satisfy the consumer's wants and needs.
Now is an opportunity for vehicle sales to move into a new normal, employing COVID-19 society's lessons. The industry will need growth to survive in the future of a recovering economy.
BCG. Automotive Demand Post-COVID-19.
https://image-src.bcg.com/Images/Auto%20post%20COVID-19_052920_tcm9-249607.pdf (Oct. 2020)
GCBC (Good Car Bad Car). 2020 US Auto Sales by Brand Analysis.
https://www.goodcarbadcar.net/2020-us-vehicle-sales-figures-by-brand/ (Oct. 2020)
V12. 90% of Car Shoppers Prefer a Dealership Where They Can Start the Buying Process Online. https://v12data.com/blog/90-car-shoppers-prefer-dealership-where-they-can-start-buying-process-online/ (Aug. 2020)