Post-pandemic: Auto Industry Woes Reveal Potential for Positive Change
While the immediate impact of the coronavirus pandemic is brutal for car dealerships, the good news is, this crisis will have an enormous and ultimately mostly positive impact on the U.S. automotive business. It will change the way car manufacturers plan their product mix, the way dealerships sell cars and dramatically alter consumer buying trends.
After months of officially imposed social distancing, semi-quarantine "stay at home" orders and non-essential business closings, U.S. car sales will skyrocket when these measures are lifted or relaxed. The reason for this is the confluence of several key factors.
Post-Pandemic Car Buying Boom
First, while auto sales are down dramatically nationwide in the midst of the general shutdown, aggressive incentive programs are being rolled out by all the manufacturers. Combinations of zero % financing, no payments for 90 days, and special payment furlough plans for customers with economic hardships have created a very active online and telephone "no-contact" car shopping environment.
Meanwhile emergency dealer inventory clearance pricing promotions are bringing the cost of many new cars down dramatically after a 10 year period when automotive prices have increased by 30%. For consumers who have been shopping the car market in the last few years, the savings potential is so dramatic—sometimes 30% - 40%—that the allure of a good deal is irresistible.
Finally, it is very likely that the long-predicted decline of private vehicle ownership will be deferred for a while as all public transportation, including airlines, trains, buses and even ride-sharing, will be less popular, as many consumers will view it as unsafe and potentially adding to the coronavirus spread.
Virus Fears Will Boost Personal Car Ownership
Not only will the current crisis revive the concept of personal vehicle ownership, but it will directly impact the kind of vehicles we are driving. For example the declining sales of small cars and sedans will probably turn around significantly as a result of this pandemic.
The buyers who were opting out of car ownership in favor of public transportation and ride-sharing, and are returning to the car buying fold, are likely to go for value, mileage efficiency and the practical virtues of these smaller "commuter" cars and traditional sedans.
The other key category, which will see a sales boost in the post-coronavirus era, will be historic in a long-view context for the auto industry. With all the major car companies spending $20, $40, $50 billion on new electric and plug-in hybrid product offerings, the current health crisis may be the precipitating event to signal a major consumer shift away from carbon-intensive internal combustion engines.
Pandemic Will Energize Sales of Small Cars, Sedans, Hybrids and EVs
In over 20 years with plenty of buzz, today electric and hybrid vehicles represent a scant 4% of overall U.S. annual vehicle sales.
The post-pandemic boost in electrified vehicle sales will be the result of two compelling forces. First, during the near-shutdown of normal activity, there has been a very noticeable and widely reported improvement in air quality in major urban areas around the world, as automotive traffic has gone from a torrent to a trickle.
"Take a look at that sky, will ya?" says Rumble Seat automotive columnist Dan Neil for the Wall Street Journal. "We can get that back, with a national stimulus program embracing transportation electrification funded by a gas tax."
The intersection of this environmental quality issue and the influx of younger Millennial and Gen Z buyers into the automotive market is likely to be the definitive market-making milestone for the electric and alternative drivetrains in the future of personal mobility.
The paradox of this situation is that at the same time as the coronavirus Virus crisis is likely to drive more electric vehicle sales, the immediate result has been to drop gas prices to their lowest prices in decades, with pump prices under $2 in many parts of the country.
The Auto Sales Business Model Undergoes Fundamental Changes
Perhaps most importantly, the basic format and structure of auto sales process will fundamentally be altered by the limitations dictated by the current crisis and the full application of many technology advances.
With the limitations on customers coming to showrooms, the expansive possibilities and potential of digital marketing will explode into full bloom. More than ever before, the dealership website will become the most important lifeline between dealerships and their new and existing customers.
"We at 321 Ignition have been focused on exploiting the full marketing potential auto dealership websites from the very beginning," says Lyamen Savy. "In the auto industry, we have pioneered Mobile First design and have taken the time to optimize functionality, efficiency and transparency to benefit the customer."
Digital marketing strategies and innovative User Experience/ User Interface (UX/UI), and Artificial Intelligence technology advances like those offered by the 321 Ignition platform, are poised to become the new normal, as neither the consumers or dealerships will want to return to the traditional "see-'em-to-sell-'em" auto showroom sales-driven model.