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Empathy, Cooperation are Key to Industry Restart

Yes, technically, the U.S. automotive industry never stopped — wasn’t forced to close down — amid the COVID-19 pandemic. Dealerships, auctions, repair shops and technicians were allowed to remain active in most parts of the country. But the stay-at-home orders and general anxiety about jobs and the economy kept customers away in droves, and reduced activity and revenues by unprecedented percentages.

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Recent articles about the glut of vehicles on auction lots, OEM production halts and trade-in value revisions have shone a bright light on many of the interconnected aspects of the automotive industry, both for industry watchers and for consumers. Even for those who want or need to acquire a vehicle, the process and considerations have significantly changed. Today’s buyers’ considerations now must extend past vehicle condition and price to include health safety protocols, logistics, parts availability and completing a transaction remotely.

Whether you feel this is a temporary setback or an existential threat, the reality is that the stay-at-home orders will be lifted soon in some form or fashion. People will return to work, shops will reopen and the country (and the world) will collectively find the way forward.

It is possible that many businesses will not survive the downturn. It is even possible that whole industries will be forever changed. In order for the automotive industry to regain its balance, it will take unprecedented cooperation and collaboration across the industry. The early days after lifting government restrictions will be fraught with uncertainty. Each individual business will determine their path forward, and those paths will range from a return back to what was done before to complete overhauls of product offerings and practices.

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Consumer confidence is the greatest unknown. The suddenness of the shutdown and resulting unemployment is likely to linger in consumers’ minds, even as many return to the workforce. Fewer households will be in a position to make large discretionary purchases, and of those that can, the anxiety of recent experience will compel some to defer those purchases until later.

In short, there is a very real chance that the reopening of the auto industry will be “soft.” For the industry to regain balance in the shortest amount of time and with the fewest losses, all of us need to support each other in every way we can. Here are a few suggestions:

1. Establish consumer peace-of-mind. Rightly or wrongly, some prospective buyers are concerned that interaction with a stranger might kill them or someone they love. Safety is a primary consideration now in all interactions, so address it openly.

What hygiene protocols are in place at your operation, and are they enough to satisfy the skittish customer and employees? What changes will you make regarding what were in-person interactions pre-virus, and how will you help the industry overcome consumer fear? Unless and until we prove our industry is taking all necessary care, no amount of marketing and promotion will stimulate demand.

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2. Help each other. Everyone has taken a hit, from the OEMs to the corner repair shop. As the market opens slower than anyone would like, buyers will be budget-conscious, particularly when shopping for used vehicles. They’ve read the reports of cars piling up at auction, and they will be expecting great deals. The savings dealers realize at auction may reduce the price they need to command at retail, but there will not be much dealer appetite for reduced margin on the sales they make.

Because of high supply and lower demand, competition will be fierce for each buyer, and buyers will be looking for the best vehicle condition at the best price. Dealers, now is not the time to cut corners on vehicle quality. In fact, those dealers who double down on CPO and other well-reconditioned vehicles will command the highest margins.

3. Work together with your customers, vendors and partners across the supply chain. Everyone is really in the same boat right now, with more goods and services to sell than there are buyers. If everyone gives a little extra and takes a little less, the industry will recover faster and emerge stronger as a result.

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So:

Dealers: Work with your suppliers and vendors to give your cars the best possible sales outcome. In addition, mechanical, that means meticulous attention to cosmetics inside and out. Challenge your reconditioning team to perform at its highest level to make your cars irresistible. Now is not the time to shop around for unfamiliar bottom-dollar newcomer vendors and technicians, even though there may be many. It’s a buyer’s market, and you want to have the best goods.

Suppliers, Vendors and Technicians: You rely on your dealerships and repair operations, so you have a vested interest in them recovering as quickly as possible. Business relationships can be tested in times like these, but your willingness to work with your customers to the extent you can to help them get back up will be remembered as a measure of your commitment to their success.

Now is the time to exercise empathy. We are facing many shared problems and can identify with each other more because of it. Each of us trying to recover all on our own is like trying to swim to shore from a shipwreck. The strongest among us might survive but banding together with others to form a raft can help support everyone and achieve the best possible outcome.

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