There haven’t been many years in history where the auto industry outlook has gone through such wild swings as 2020. Auto industry trends – and especially auto industry sales trends – have been thrown into disarray by broader societal factors.
This makes predicting the rest of 2020 a difficult challenge, but one that dealers need to closely follow and consider as they plan their own operations for the remainder of the year. There are new opportunities in the evolving automotive marketplace for dealers prepared to take advantage of them.
In this blog post, we look at some of the big questions surrounding auto industry trends in 2020, including:
- What are the industry-wide predictions for new vehicle manufacturing and sales numbers in 2020?
- How is the COVID-19 pandemic changing automotive consumer behavior and preferences?
- What do these auto industry trends mean for dealers?
Finding Silver Linings in Auto Sales Outlooks
It’s not news to dealers that shocks to both consumer demand and manufacturer supply have driven auto industry sales downward, creating a challenging auto industry future outlook for the rest of 2020.
In April, IHS Markit released a global light vehicle sales and production forecast for 2020, predicting a 22% drop in sales across the worldwide industry from 2019 levels, with a 26.7% drop in North America alone. While this is obviously not news dealers want to hear, the worst seems to be behind us, with a 47.9% SAAR decrease in sales in April improving to a 29.8% deficit in May. This same trend applies to service drive profits, with major auto groups reporting some improvement in service profits in May as compared to April and March.
Adapting to Vehicle Inventory Challenges
That current auto sales decline is tied into a predicted 19.6 million vehicle decline in global manufacturing from 2019’s 88.9 million vehicle production total. In North America, that production decline was on full display in April, as OEMs built just 4,840 new vehicles.
By now, most automakers have gotten at least partly back to work, with automakers like GM and Ford cancelling their annual summer shutdowns in an effort to make up lost production efforts. However, new vehicles are still slow to trickle into dealer showrooms, creating inventory challenges for dealers as customers try to take advantage of attractive 0% financing options.
This auto industry trend comes at the same time as used vehicles are flooding used car lots from rental car companies impacted by COVID-19 closures. These newer and lower-mileage cars entering the marketplace are creating an attractive opportunity for dealers as defleeted vehicles usually have low reconditioning costs and can be a source of solid profits while the new vehicle pipeline refills.
Looking at the Bigger Picture of US Auto Sales Trends
The larger reality is many U.S. auto industry trends in 2020 are the result of broader societal trends related to how and where people are working – and how they’re getting around. For instance, at various points over the past few months, public transit ridership has been reported to be down 90% in New York City, 70% in Los Angeles, more than two-thirds in Salt Lake City and Seattle, more than 50% in the Tampa Bay area and Indianapolis and 25% in Houston. The question for the auto industry’s future outlook is how many of those riders will return to transit, and how many will instead purchase cars to meet their mobility needs.
The U.S. Centers for Disease Control and Prevention is currently adding to the complexity of this issue. The CDC has released guidance that suggests workers drive themselves to work rather than take transit or carpool as the safest mode of commuting.
Changing Consumer Car Buying Behavior
Beyond where and how much Americans drive, it remains to be seen how the pandemic will change Americans’ product preferences, but some trends are beginning to arise.
While much of the news surrounding U.S. auto sales is grim, the reality is there are still going to be millions of consumers in the marketplace for a new or used car. Many consumers only postponed their shopping during stay-at-home orders, and as cities and states begin to reopen their economies those shoppers are broadly going to be re-enter the marketplace.
However, they may not make the same purchase decisions as they would have before the pandemic. Lost income and lagging economic uncertainty are leading to changes in car buying behaviors. For instance, a Cox Automotive survey finds that 31% of buyers have reconsidered their preferred vehicle body style due to COVID-19, citing better gas mileage as the leading influential factor. These same economic limitations are ushering some customers into the pre-owned market who otherwise would have been shopping for new vehicles.
These changes in automotive consumer behavior spell big opportunities for auto sales conquesting efforts in the coming weeks. According to data from IHS Markit, 9 million nomadic households, defined as shoppers who have no meaningful brand or dealer loyalty, will be in-market for a new car in 2020, but dealers need to act fast to take advantage of these opportunities.
What This Means For Dealers
If 2020 has taught us anything, it’s the degree to which even the best and most thoughtful auto industry trend predictions can be upended by the reality of the next morning’s headlines. This creates obvious challenges for car dealerships trying to make plans for their business and devote resources to the future.
One immediate step dealers need to take is investing time, effort and resources in building a customer experience-focused dealership culture supported by tools and capabilities that allow your people to be as efficient and effective as possible. Is your marketing based on data and real-time insights that predict consumer behavior, or are you just “spraying and praying?” Does your dealership reporting give you the insights you need to be an effective manager and leader? Are your digital tools up to the demand of being the new “front door” of your sales operation? Have you connected your service department to sales and are you effectively marketing your service drive to increase your service conquest leads? Does your F&I experience make your customers more or less likely to want to do business with you?
Rather than betting on one auto industry trend, dealers have the opportunity to focus on what they can control by ensuring they have the fundamentals in place that will carry them through whatever the future may hold.
While we can’t predict the future, one thing is certain: people still need cars. If you’re interested in learning more about what Mastermind’s marketing and sales capabilities can do to help you prepare your dealership for success in tomorrow’s marketplace, please contact us.