March 2020 felt like the longest decade in modern history, didn’t it? In the automotive industry, dealerships in most states have gone from flourishing businesses to ghost towns with the odd tumbleweed customer rolling through for an oil change. Government orders to shelter-in-place along with a sentiment of fear are keeping people at home rather than car shopping.
That’s evident after automakers posted year-over-year March sales decreases like GM’s 44.7% dip, Toyota’s 39% decrease, and Ford’s 40.8% slip. If a dealership isn’t moving metal, what do they do to turn a profit?
The Trump administration has deemed that automotive repair and maintenance businesses are essential services. Make the most out of that designation at the current time and shift from a new car retailer to a nearly-new car maintenance facility. By no choice of your own, the store isn’t going to see much traffic for vehicle sales. But all your customers who previously bought a car will still need to maintain them.
The marketing you’ve done for cars should be mostly repurposed temporarily to emphasize the need for service at this critical time. Beware of marketing techniques though – keep the message overall positive. Put any campaigns through several wise filters to ensure you don’t seem like you’re capitalizing on a really chaotic time in history.
Dealers who previously hit 100% absorption rates in their service departments are best positioned to ride the wave, especially short term. But don’t think that your February 100% absorption makes you safe. If you haven’t seen it already, expect a dramatic shift in what service department traffic looks like.
With financial instability across the country, you’re likely already seeing customers tighten their purse strings. Non-essential work will probably have to wait until later. That means lower dollars per RO. Volume is the solution to that, and that’s going to be difficult to manage with self-isolation, WFH strategies, and quarantines.
Trim the fat where you can. If you can make do without a new piece of equipment or you can negotiate lower shop supply rates in the interim, it will be prudent. Every percentage will be critical for your absorption rate.
Let’s be clear – your people are the most important part of your dealership. They are the resource you want to protect the most. And to maintain your workforce, you may have to make some very hard decisions.
I hate to say it, and I hope I’m wrong, but I don’t think we’re going back to business as usual when COVID-19 is in the rearview mirror. How a dealership operates, from the storefront to the service department, will need to adapt rapidly to stay relevant.