As automakers continue to grapple with pandemic-related supply-chain disruptions, including the global semiconductor shortage and factory and assembly plant lockdowns, auto dealers are also facing empty dealerships and a lack of both new and used car inventories. Since May of 2021, new-vehicle days’ supply has been below 40, with some types of vehicles seeing days’ supply hovering around 20. All combined, those challenges have contributed to the auto industry decline of over 15 percent in new car sales from the first quarter of 2021 to the first quarter of 2022.
Skyrocketing gas prices, rising car prices, and a lack of inventory are all issues poised to persist throughout 2022, culminating in declining car sales and the potential for an auto industry decline. However, despite the shortages, shutdowns, and the surging price of raw materials putting additional pressure on vehicle affordability, the automotive industry is still expected to grow at a CAGR of 3.71% from 2020-2030.
In particular, auto dealerships have opportunities for electrified vehicles, online auto sales, and service revenue. The automotive marketing specialists at Safeguard can help with everything you need to run your business more efficiently and promote it more effectively, from essential management products to innovative marketing services.
What would an auto industry decline look like?
The automotive industry has been hit hard by auto parts shortages, supply chain issues, and record low inventories. With nearly every automaker forced to adjust its production schedule significantly, there are fewer units in inventory at dealerships. Sales volumes are anticipated to be well below their levels in 2021. Research shows that total U.S. retail sales for the auto industry were down 21% year-on-year.
Service Departments Drive Revenue and Improve Customer Service
With cars becoming smarter and more sophisticated, rolling off assembly lines programmed with computers and sensors, consumers are also keeping these cars longer than before. The increasing number of aging cars on the road is a growing opportunity for auto dealerships to utilize their service departments.
The service department has historically been an essential component of a dealership’s bottom line. With dealers facing prolonged inventory shortages, the service department has become even more critical for a dealership. Even as dealers saw a slight dip in customer volume, overall repair order revenue has continued to increase. The service department is not only a revenue opportunity but also a customer service tool.
Auto dealerships can see the most benefit from their service department by ensuring that it runs efficiently, including having the appropriate equipment and knowledgeable employees and employing automation wherever possible.
Online Auto Sales are an Opportunity for Dealerships
With a growing number of shoppers turning to online car buying, online car shopping represents a tremendous opportunity for auto dealerships. Before the pandemic, less than 2% of vehicles were purchased online. However, in 2020 that number jumped to nearly 30%. Beyond that, 80% of car shoppers now say they are open to buying a vehicle online. While the 2021 global online car-buying market reached a U.S. $261.2 billion value, it is expected to grow and earn $722.79 billion by 2030.
With an increasing value on convenience, online car-buying allows consumers to shop for and buy a car at the time that is most convenient for them. In addition, online auto buying is often more transparent, and many customers enjoy the no sales pressure environment of buying a car online. Customers can also shop from a much larger geographic area. It’s no surprise that buyers reported the highest levels of satisfaction when the overall car-shopping experience took less time and was more efficient.
Electrified Vehicles Are Gaining Market Share
Electric vehicles have often been considered niche products, representing a small share of the population, but demand for E.V.s is increasing. In 2021, electric car sales reached 6.6 million, surpassing their market share from just two years earlier. Encompassing hybrids, plug-in hybrids, and pure battery-electric vehicles, electrified vehicles are expected to continue to gain more market share from conventional internal-combustion engine vehicles, particularly with elevated gas prices. Automakers across the globe, including Ford, General Motors, Honda, BMW, Volkswagen, and Hyundai, are looking to increase fleet electrification with a diverse range of electric vehicles, ranging from SUVs to supercars.
Although 2022 continues to pose many challenges for the auto industry, including inventory shortages and rising prices, trends and opportunities remain. At Safeguard, our automotive marketing experts can help with innovative strategies to spark interest and drive sales. From digital marketing to daily business essentials, we specialize in engaging and effective solutions to help you leverage these growth opportunities. Call 844-4CARBIZZ to get started.
- Rising car prices and a lack of inventory lead to declining car sales and the potential for an auto industry decline.
- There are fewer units in inventory at dealerships, and sales volumes are anticipated to be well below the levels they were at in 2021.
- Auto dealerships have opportunities for electrified vehicles, online auto sales, and service revenue.
- The service department is a revenue opportunity and a customer service tool.
- At Safeguard, our automotive marketing experts can help with innovative strategies to spark interest and drive sales.