The stories are similar across the country: lots are sitting empty, features are being deleted to secure inventory, and there are even reports of customers following vehicle transport trucks down the street to see if theirs are on it. We’re living in an unprecedented time amid one of the most bizarre supply chain crises the automotive industry has ever seen.
And the expected hit to the number is staggering. The semiconductor and microchip shortages and global supply chain woes are expected to cost the industry more than $200 billion worldwide before it’s over, which could take many more months. In Canada alone, sales have been down by double-digit percentages for the past three months: 11.4% in August, 19.6% in September, and 17.7% in October.
The good news, if it can be considered as such, is that the chips that are available are being reserved for higher-margin vehicles, and those are moving quickly when they do arrive. According to the CarGurus Vehicle Availability Index & Insights report, new days-on-market was down 10.3% from September and down 27% year-over-year while used days-on-market dropped 6.4% from September. The decrease in days-on-market is impacting vehicle prices as well. The average new vehicle listing price was up 9.3% from September and 17.7% year-over-year. Similarly, the average used vehicle listing price was up 4.2% from September and 31.4% year-over-year.
Ultimately, this means the few vehicles that are arriving are quickly turning a solid profit. Whatever strategies your dealership is using to manage the situation, there may be other ideas out there you haven’t considered. Here are some tips to help you make the most of the current situation and stay on top of the game.
Don’t stop spending on advertising. It makes sense to be strategic, of course, but cutting advertising entirely might not be the right strategy. Instead, keep a foot on the pedal and invest in brand awareness messaging to stay top of mind with consumers. As long as you have vehicles available to sell, it’s important to get them in front of consumers who might be open to different makes and models. You can also use this time to evaluate what’s working and maximize efficiency across your ad campaigns.
Don’t try excessive mark-ups. Marking up high-demand vehicles, just because you can, may net you a greater profit in the short term. But word travels quickly online, and in the long term you could wind up generating distrust with a wider swath of potential customers than you might realize. The forward-thinking dealer will choose his or her reputation and customer relationships over a quick boost to the bottom line.
If you have inventory, cast your net wider. Dealers who have vehicles to sell may find that potential clients are open to having the vehicle delivered. Consider using Area Boost to expand your dealership’s reach to cover a broader geographic area. Area Boost helps you compete in low supply markets by making it easy for shoppers to find the car they want. Participating dealers see 20% more VDP views from shoppers in their target market.
For more information about CarGurus Area Boost or to discuss the benefits, contact your CarGurus rep.
Buy back leased vehicles early. Some dealers are finding success with buying customer vehicles back from leases early because the current environment allows them to resell those vehicles for greater gains than usual. If you haven’t done so already, consider having your sales staff go through the database of leasing customers to gauge interest in early buybacks to bolster your inventory.
Use this forced downtime to update your infrastructure. Due for an image update? Need to upgrade your telephone or IT systems? With less foot traffic coming through the door and lower demand for infrastructure, now could be the best time to invest in your dealership’s future while creating the least disruption.