March madness typically springs buyers back into the market as many consumers benefit from the extra cash of a tax return. This March, however, saw most shoppers sent home amid COVID-19 concerns to guard against infection, severely impacting our economy and teaching us new terms like “social distancing.”
The entire distribution chain for new and used vehicles has nearly idled, with major slowdowns from manufacturing to retail, auctions to transportation. Dealerships are under a multitude of federal, state and local restrictions which have caused confusion and have effectively ground the industry to a halt.
In mid-March, when the slowdown accelerated, most all automakers dusted off the playbook from post-September 11 and the financial crash of 2008, shifting their incentives from transactional offers (dealer and consumer cash) to offers that help address the severe drop in consumer confidence.
By mid-March, we saw a flood of offers that generally fell into three categories:
These are strong value propositions for consumers who need to buy a vehicle as soon as possible, for example, when a lease is up, or there is a vehicle accident replacement. Consumers can see these many offers on shopping sites across the internet, including Cox Automotive’s Autotrader and Kelley Blue Book and on the multitude of dealer websites run by Dealer.com. Kelley Blue Book is publishing a continually-updated summary of programs from automakers and lenders.
Many consumers can apply these new incentive offers to in-stock vehicles and lock the deal online, perform a virtual 360 walk around, and in some cases, they can receive home delivery if they have concerns about visiting the dealer facility.
Similar confidence-building incentives got the U.S. auto industry rolling again in the aftermath of the September 11 tragedy. Back then, the market rebounded quickly. This time may be different, however, as the impact on the economy and the global nature of this disease is new to everyone.
We know the auto market in the U.S. is falling fast and will drop significantly from last year’s 17 million level. More importantly, though, what’s next? When will consumer confidence return?
From experience, we know our automakers and dealers will batten down the hatches and weather this storm. But the landscape will be different when it passes, with a shift toward more digital retailing, online purchasing tools, and home delivery services for new and used vehicle sales as well as service and repairs.
These are not new concepts. They are, however, quickly becoming a core function of good auto retailers. While this pandemic will pass, memories of social distancing will stay in people’s minds. In other words, the pandemic will likely drive a paradigm shift in consumer expectations and auto retailing services. OEMs and dealers will need to improve their online skills to make online retailing more efficient and seamless.
In our new world, the ability to provide an accurate, timely price to would-be buyers – quotes that accurately incorporate all relevant and current incentives – will become more important than ever.