2021 has been a record setting year in automotive for various reasons. We have been challenged to dive into new sales methods, faced unprecedented inventory issues, and seen record setting sales through the first half of 2021. As sales begin to slow and inventory troubles remain the same, dealerships need to adjust their processes again to remain viable and profitable as the climbing trend starts to level off.
First Half of 2021: By the Numbers
No one can deny that the first half of 2021 has been a rollercoaster of sales, profit, and inventory. While not quite matching the SAAR of 2019 (but very close), according to Cox Automotive research, the first-half U.S. auto sales are forecast to grow 30% year over year. Comparisons to 2020 are difficult because of the obvious strains from the coronavirus, still automotive sales are well above YoY watermarks. According to J.D. Power’s Thomas King, we are having “ the best first half of any year on record. Records will also be set for average transaction price, total consumer spending on new vehicles and retailer profitability.”
April topped the charts with a SAAR of 18.8 million, 17 million in May, down to 16.4 million in June. And all while increasing profitability, while battling lack of inventory.
According to Charlie Chesbrough, senior economist at Cox Automotive, “We expect the second half to be constrained, and even though there will be strong demand from consumers, they can’t buy what isn’t there. How long the supply crunch will last is difficult to estimate since the issue varies greatly across product lines and geography, but certainly the next few months will be revealing.”
Forecast through December 2021
Car shoppers may have a case of “sticker shock” in 2021, as MSRP reigns on New Inventory, and Used Vehicle prices are higher than ever. Many manufacturers have slowed or stalled the heavy incentives and cash-back programs that were all too familiar in 2020.
Edmunds research stated the average transaction price (ATP) for used vehicles climbed to $25,410 in the second quarter of 2021 compared to $22,977 in Q1 and $20,942 in Q2 2020, marking the highest quarterly used ATP Edmunds has on record (Edmunds)
There will be customers who want to wait out the current state of automotive due to these factors (much like the housing market), and dealers will have to be creative in bringing customers in the door.
To put this in perspective, in the beginning of June, 2021, the average list price on a new car in America sat at $24,414. In the previous month, it was $22,568 — and that was a record high. Prices increased more than 8% in just one month. (KBB)
To summarize - pent up demand is lessening, prices are staying high, some consumers may want to push off that new auto purchase, and dealerships need to focus on taking advantage of every opportunity and making the experience the best it can be.
What to focus on for the second half of 2021
Values on Trade-Ins
People who are reluctant to buy, may be motivated by the amount they will get for their trade-in. As noted earlier, values of used cars have reached a level that we have not seen in quite some time. If a consumer was ever thinking about trading in or selling their vehicle, this is the time to get the message out. And according to Bankrate, there is no better time than now for consumers to trade in their vehicles. Is your dealership ready to reach out to these customers and guide them through the process?
Utilize the data in your DMS and reach out to customers making them aware of the potential values and engage in a “We Buy Cars” campaign. Create social media ads that let the public know now is the perfect time to either sell or trade in. Mine your service database and portfolio to reach out to customers in an equity position, customers who are getting close to their end of lease--anyone who would be in a position where this would benefit them.
Regardless of how you do it, you need to strike while the iron is hot.
Digital Retailing has been prioritized since March 2020, with many OEMs either making it a requirement now or in the near future. And while the percentage of people who want to purchase a vehicle fully or partially online is lower (29% according to Deloitte), that is still a percentage that is continuing to grow and that you do not want to ignore.
Understanding what people want from the tool will also help to set expectations at the dealership with how the tool should perform. While your Digital Retailing Tool will help sell cars online, most consumers want to utilize the tool to gain information, save time, and then come into the dealership to finish the process. 75% of consumers surveyed stated that they would not want a fully virtual process because they want to see the car. 64% stated they would want to test drive the vehicle. Your digital retailing tool will help in bringing incremental sales, but more importantly serves as a tool for consumers to make the buying process easier, faster, and streamlined.
Customers who may be reluctant to purchase need to be won over by your engagement and customer experience. One of the first elements to evaluate on your site is your customer engagement. If you are relying on AI to solve all of your needs, you will most likely have dissatisfied customers left with non-answers to their questions. Ensure that your chat bots, text bots, Facebook Messenger, and all other elements are either manned by real people or have real people as an immediate backup. Nothing is worse than typing in a question to a chat tool, having AI try to decipher it, and then having to wait as someone who actually has the ability to problem solve and answer questions can get to the platform and type a response.
View your customer experience from the outside in. Evaluate the process and remove any friction points that may cause a customer to leave.
And if you do not have a team in place to immediately respond to customers, BCP can provide some suggestions for solutions.
The success and stamina of dealers in the first half 2021 has demonstrated the resilience, determination, and power of automotive. Supply and demand benefitted the vertical, but now as we start to see a stabilizing of purchases, it is time to reevaluate process and ensure dealerships are poised to be successful for the rest of 2021 and into 2022.
BCP is the customer engagement leads, and would love to help position your dealership for success. We are here to help with many engagement facets of your business. Click here for more information.