As COVID-19 restrictions continue and even increase in pockets across Canada, automotive sales have been remarkably resilient. Consumers who formerly relied on public transit or ride-hailing are buying cars for the first time or replacing their existing vehicles, spurred on by the social distance they naturally provide.
But do automotive dealers need to worry about another decline as we head into winter and a second wave? From the perspective of complete shutdowns, most likely not: the lessons learned through the initial spring lockdowns are allowing dealerships and other low-risk businesses to continue operating with the right measures in place.
However, some tweaks to the systems and mindsets put in place in April and May could help dealers stay ahead of the unforeseen challenges through the colder months.
There’s a lot of data out there to digest at the moment as analysts attempt to make sense of a pandemic market. While there are a few points that are of mild concern, on a balance the situation for auto dealers appears to be largely positive. Staying on an even keel will be a key piece of the successful dealer’s tool kit for the next few months.
For example, a report by Desrosiers Automotive Consultants showed third-quarter sales declines of 38.2% for large SUVs, 28.7% for subcompact cars, and 26.1% for intermediate cars. However, subcompact SUVs recorded a 19.2% sales increase, luxury sports cars were up 17.9%, and small pick-ups were up 17.1%. Moreover, Desrosiers estimated that the sales in September 2020 were up 2.4% versus the same month a year earlier, and early reports suggest October 2020 to be on a similar pace, even as the Bloomberg-Nanos Canadian Confidence Index shows that consumer confidence has been declining steadily since mid-August as restrictions have increased under the second wave.
Making decisions based on automotive industry data rather than mainstream indicators, and pivoting into segments that match local market demand as much as possible, will result in the most prudent responses to market trends.
Be prepared for containment measures.
Dealerships based in rural areas may think they can relax, but renewed restrictions are being considered even in remote locations as coronavirus cases spread further afield. Although complete shutdowns are unlikely in a second wave for low-risk businesses such as dealerships, ensuring that the protective measures put in place for your customers and staff are still being followed to the letter can avert disaster, both from a health and a public relations perspective.
It’s also wise to have any additional measures that eased pressure in the first wave ready to go at the flip of a switch if they haven’t been carried through the summer, such as at-location vehicle pick-up and drop-off or internet-based selling. Consider also how impending severe winter weather might require modification to the plans that were put in place in the initial lockdown, including increased delays for vehicle transportation or staff, winterizing needs on vehicles used for pick-up and deliveries, or even handling instances of vehicles being damaged in transit.
Expect inventory to be an ongoing concern.
Access to inventory is recovering across the country, but it’s slow going. Wholesale prices remain stable but are expected to stay high through the end of 2020 according to Canadian Black Book, and new vehicle inventory deliveries are improving but still have not recovered to pre-pandemic levels.
This is leading dealers to consider creative solutions. Try directing service department staff to encourage customers towards trade-ins and doing more direct purchasing through Facebook Marketplace, Craigslist, or similar outlets. One dealership in Barrie, Ontario, has even placed curbside signage that says, “We buy your car, even if you don’t buy ours.”
Some of these tactics may not be effective in normal times, but right now it’s worth expanding your playbook to bring in vehicles from alternative sources.