Preparing to re open Car Dealerships! What can we expect in the coming weeks and months?

With car dealerships re opening on 1st June, forecasting the level of sales over the coming weeks and months will be key to restarting the business successfully. Clearly dealerships have huge overheads and bringing people back to work will be a cost many dealerships will take on with extreme caution before being sure of the likely demand, so what can we expect and what should you plan for?

As you will have heard many times over recent weeks we are in "unprecedented times" so we have no way of knowing how to restart businesses that have been put into a state of suspended animation. Over recent weeks I have been keeping in close contact with many of our customers, the directors of dealer groups, national sales managers and directors in automotive manufacturers and I have begun to analyse the mainly anecdotal evidence that presents itself to me, in order to form my personal view on the likely trading environment car dealerships are going to find themselves in.

The key factors in predicting the sales rate over coming weeks are both the supply of vehicles, new and used and the likely demand from consumers. Do manufacturers have stocks of cars they need to move? Are there plenty of used cars available on the wholesale market? Do consumers have money to spend on cars? Will customers come to dealerships?

Taking new cars to start with, and having spoken with a number of OEM's over recent days it has become apparent that everyone I have spoken to have inventory they need to liquidate, vehicles frozen in the supply chain. It is a known fact that car plants have been shut down across the world for shorter periods of time than retailers and as such have kept producing vehicles. A key question for the UK is, what are right hand drive stocks like? Many vehicles in late March did not get registered and delivered and as a result many UK vehicle storage compounds are nearing capacity with cars continuing to be produced. I believe the UK will see significant pressure from manufacturers to move above average levels of vehicles over the coming months.

One of the usual channels open to manufacturers when supply pressure exists is to register cars and sell them at huge discounts to rental companies. The ‘Lockdown’ has meant that many hire car companies have had their fleets parked up and stagnant like never before and as a result they have put a freeze on renewing their fleet. As this channel is less open to the manufacturers could this see a redirection of these vehicles with the fleet support fund in to the consumer market?

With right hand drive over supply pressure and minima rental companies to unload volumes of cars into could this translate in to unprecedented consumer incentives and fantastic finance deals? In particular I would anticipate some of the best PCP payments on vehicles seen for some time (as this hides discount levels in residual value support). So, it is my informed opinion that we could see some of the best consumer offers we've seen for a very long time.

Speaking with two OEMs today, it is becoming clear they are looking to put forward a 4 month Q3 Campaign running from June 1st until the end of September with some very strong consumer offers. Interestingly, some manufacturers are indicating they have significant amounts of used cars which they are needing to move. So that’s my new car predictions...but what about used cars and consumer demand?

The used car market and auctions have been largely on ice for two months now. Dealers are sitting on 60 day plus inventory from the moment they reopen. Leasing companies have been extending leases to keep drivers in cars for the last two months and as a result there is a significant amount of stock waiting to be released from drivers back into auction houses. Many have predicted a significant drop in used car values, that is once enough transaction data is available. However, I believe if dealers can get a fast start and start driving used car sales quickly then there will be enough retail pull through to keep used car values fairly stable.

Speed of used vehicle preparation is going to be key; workshop capacity with sanitisation processes are also going to be a pinch point in keeping the flow of used cars from auction houses to consumers. Dealers are going to need to ramp up workshop capacity to levels above that of March and September very quickly to ensure they can keep up with the retail demand as the government ends the MOT extension scheme and the back log of routine servicing and repair starts making its way in to dealerships from consumers. My advice to dealers is, if your workshops have capacity now, buy used cars and use that capacity to prepare them as early as you can in June and use a system like Motorvise Vehicle Progressor to automate and streamline your vehicle preparation processes and ensure you are always aware of your preparation pinch points so you are informed and able to manage the process. I would quickly run a major used car marketing campaign to move the existing stock and drive sales, perhaps a Motorvise Socially distanced car sales event.

The last remaining question is: will there be consumer demand? In other markets that have emerged from lockdown, dealers have been taken by surprise at the speed and volume of enquiries. Autotrader traffic clearly indicates a high level of interest and increasing numbers of searches. The dealerships that have made it clear to consumers they are open to take orders throughout lockdown with strong marketing have continued to take up to 25% of their normal order take. When I speak with friends, self employed people, all but a minority of people have done well out of the government COVID 19 support packages and actually have more ‘cash’ available post lockdown than they did pre lockdown. Wherever I look for evidence or guidance on this the conclusion I come to is a huge ‘yes’, there will be good solid retail demand!

With social distancing and pressure on the public to avoid public transport could this also push up demand for cars. In metropolitan areas over the last decade we've seen a significant drop in the number of under 25s choosing vehicle ownership, could this reverse the trend and add to demand for new and used vehicles in the coming months?

So back to the original question: how do we prepare our car dealerships for restart? I believe the answer is to begin now- this week with daily online. Prepare for restart ‘training’ with all of your staff and teams to get them back into a focused and working state of mind. I would put the safety of customers and team at the forefront of all practice. I would unfurlough almost all of my staff immediately on the 1st June if I can accommodate them working in a socially distanced manner. I would prepare for some of my sales team to be doing customer appointments from home via screen share. You will need a showroom system that can fully transact without paper and take payment from a customer’s home? If you've not got that try the new Motorvise Showroom System MotorDat. With an easy version of the optimisation and controls of the old Vardy showroom system, cutting edge machine learning, full diary, DOC and process control, and almost no customer data entry (never mind re keying) it's the best system on the market. I would also prepare my dealership marketing machine now! Its going to be important to ensure your customers know you are open that you have strong incentives on the table to buy a car now and that you can interact with the customer on their terms, either safely and socially distanced in the showroom, via Zoom meeting or over the phone/email. I would urge you to book a socially distanced car sales event with Motorvise ASAP to get things moving as soon as your sanitisation and social distancing practices have bedded in enough.

I believe dealerships may be caught out by the demand and will struggle to keep up with enquiries. Those dealerships that bring everyone back, take the plunge start marketing fast and commit to a new safe socially distanced way of working could see a huge increase in sales year on year in June for both new and used cars. Those dealerships that hold back, bring back small numbers of staff will miss the boat and start missing enquires, lose customers to the more proactive sales lead organisations that focus on customer safety whilst also fully engaging their sales and marketing machine from well before the 1st June!

For more information on the MotorDat Showroom System, MotorVise Socially distanced events, MotroVise Vehicle Progressor, or our full compliance, warranties GAP and other add on products system visit www.motorvise.com or email [email protected]