Will the Coronavirus Change the Automotive Industry Forever?

Business does not like uncertainty, and the one thing the experts are sure about COVID-19 is that we don’t know when it’s going to end. With that in mind how can the automotive industry adapt to new norms and get folks back into dealerships?

The traditional model of selling vehicles centres around big open areas packed full of cars, and a few of the more shiny modern models for sale on the shop floor itself. Some of the bigger dealerships go a step further with luxurious waiting areas, wi-fi, large-screen tvs and refreshments. But that has essentially been the model for a generation or more. And then the pandemic came…

The Society of the Irish Motor Industry reported that new car registrations for May declined 72.3% (1,751) when compared to May 2019 (6,320). Indeed retailer’s showrooms remained closed across Ireland until the 18th of May. And if we look at the bigger picture, a total of 64,344 units of new vehicles were sold in Ireland in the first half of this year, down 35% compared with the same period last year, according to figures released by the country’s Central Statistics Office (CSO) on Wednesday 8 July. The picture remains the same as we draw towards the end of the year. All bad news right? Or maybe, just maybe this could be the kick in the backside needed to force the industry to re-examine how it is doing business, and to meet the realities ofne w marketplace demands.

In times of crisis it’s usually revealing to first consider how the big players are reacting as they usually have the most to lose, and the most resources to put things right again. The car manufacturers are a good starting point to reflect on new trends so let’s see what some of them have been up to since the outbreak of the Coronavirus:

Infiniti: They are training their salespeople on how to use videoconferencing tools effectively to showcase their cars via virtual tours. 60% of their retailers in the US are delivering fully sanitized vehicles direct to customers’ homes for test drives (and their executives report that home-delivered vehicles convert to sales at a much higher rate than cars taken for a test drive near the dealership). This new policy have proven so successful that Infiniti plan on incorporating it into their sales strategy even after the pandemic ends.

Volvo: Website enhancements to enable more visibility and interaction with their range of vehicles remotely and an increased emphasis on virtual walkarounds.

Mercedes: A radical re-evaluation of their selling model is underway as executives question the ongoing effectiveness of large retail spaces to show off their vehicles.

“Do vehicle showrooms and service facilities have to be shared in the same location?” a Mercedes-Benz spokesperson told the Wall Street Journal recently. “We are looking at many areas which invite the natural questions of what to keep, what to cut, and what to amplify.”

Now, just to be clear, we cannot be sure that any approach is the right one or the winner at this point in time. But it’s fair to say that when an industry in any sector faces massive disruption, it is often the businesses that adapt the quickest that come out unscathed, or even smiling on the other side. Furthermore it’s not the case that only the large car manufacturers have the resources to implement changes, as the cost of using technology has been lowered dramatically in recent times. Anyone with a smart phone or a video conferencing tool can make a start at enabling some kind of remote working space. One of the best examples of a dealer that has rapidly adapted to the challenges posed by COVID-19 is Joe Duffy motors and their digital dealership option which promises live chat, online service bookings and even personalised videos. It’s all a far cry from a guy in a suit haggling over price with a buyer on a crowded parking lot, but it may well be the future of selling cars.

A friend of mine actually went car-shopping during the pandemic period. He began by deciding on the model he wanted after conducting some online research, and then checked if this model was available at the online inventories of various dealers in his region. He didn’t want to call a dealer directly without being assured they had his preferred model in stock, as he felt they would try to sell him on other models. The millenial consumer has similar demands. They tend to know what they want and will move on quickly if you don’t have it. They want as much of the transaction as possible to take place without any direct contact being so used to the convenience of online purchasing, and they want an immediate or very fast response if you do have what they want. Ultimately my friend discovered that the dealers that he contacted had varying levels of responsiveness and preparedness for ticking these boxes. The dealership he eventually bought from had his model and detailed info on it in their inventory, were extemely responsive via online channels (email and live chat), and even sent a lengthy YouTube video of the salesperson showcasing the car he wanted.

There will always be room for the old-school sales model of a buyer visting the dealer and test driving the vehicle, but dealers that are only catering for that kind of customer are going to miss out on a large chunk of the market, particulary as many younger buyers have grown up “Amazonised” (expecting the convenience of rapid online-based transactions). The pandemic we are currently experiencing could be both a crisis and an opportunity if dealers take action to provide for this new demographic.