As we close out 2021, we find the car business in a state of transition. Looking ahead to 2022, it’s a good time for a top-down, global overview of the auto industry. While consumers are still buying cars, the way that shoppers are going about car buying has changed dramatically as a result of the COVID-19 pandemic, evolving technologies and other factors.
Ongoing COVID-19 Pandemic
The ongoing COVID-19 pandemic has severely affected the automotive industry. Many countries contributing to the industry were forced to shut down, stop exporting or close borders. The disruption in Chinese parts exports, interruptions in large-scale manufacturing across Europe and the closure of assembly plants in the U.S. have all had an impact on the ability to produce new vehicles for sale.
When several factories closed down, the supplies needed for chip manufacturing became unavailable for months. This situation, combined with increased demand for consumer electronics, led to a shortage in computer chips. Toyota will make about 40% fewer cars and trucks around the world in October due to the chip shortage and the ongoing COVID-19 pandemic. Many experts fear that auto production may not return to its normal rates until 2023.
Switch to Electric
Another trend to keep an eye on in the long-term is the switch to electric fleets and batteries. GM announced earlier this year that its goal is to sell only zero-emission cars and trucks by 2035. Jaguar later announced a similar plan, with a much faster timeline of 2025. While this trend may take longer to see come to fruition, it is certainly one that auto dealers need to be aware of for the future.
Automotive Industry Supply
The hit to supply has been significant, even catastrophic, in the last few years. The coronavirus pandemic led to a major slowdown in new vehicle production. In 2020, motor vehicle production declined dramatically across the globe due to a drop in economic activity and travel restrictions put in place as a result of the COVID-19 pandemic. In North America alone, production dropped more than 20%, according to the International Organization of Motor Vehicle Manufacturers.
Automotive Industry Demand
As automotive production has dropped, however, the demand for vehicles has increased. The pandemic has resulted in many people wanting their own modes of transportation. This means that many people do, in fact, still want to buy vehicles right now. Consumers who are in a financial position to buy new cars are looking to upsize their purchases to bigger vehicles with the latest amenities and technology available.
As a result, the demand for new vehicles is outpacing the supply. This is not expected to change any time soon. As you know, this is good news for auto dealers, because it means you can charge higher prices for the cars you do sell, resulting in a wider profit margin.
The Future of the Auto Industry
The first thing to know is that digital retail is here to stay. Car buyers are spending time researching vehicles and their purchases online before signing the paperwork, even if they do end up visiting a dealership in-person to close the deal.
This means that consumers are more educated than ever. They likely know exactly what they want before they even walk onto your showroom floor. They are doing their research online, investigating cars and dealerships ahead of time. This means that you can sell more cars by adopting new technology, like text messaging with leads and using live video conferencing to show off your inventory.
The way to succeed today is by realizing that cold calling, walk-ins at your dealership and the ways of selling cars in the past are simply archaic. The new way of doing business is to meet your potential customers where they already are: online.