The coronavirus pandemic has upended auto sales and buying a car will never be the sa…
A salesman walks past used Toyota Motor vehicles at the Brent Brown Toyota dealership in Orem, Utah, on Monday, April 6, 2020.
George Frey | Bloomberg via Getty Images
Pickup, delivery or curbside? It’s a question Americans have grown accustomed to answering for food delivery and groceries during the coronavirus pandemic. It also might be something they’re asked when purchasing their next vehicle.
The Covid-19 crisis has upended auto sales, and many don’t think they will ever be the same again. Dealers and automakers are changing business strategies and investing millions in new digital sales tools as consumers demand more online and personalized services.
“For digital, this whole disruptive period with corona is an inflection point from which there’s no turning back,” Mike Jackson, chairman and CEO of AutoNation, the country’s largest auto retailer, recently told investors.
What that means for consumers is being able to choose how much or how little of the process they want to conduct online. That includes scheduling a test drive or delivery of a vehicle to appraising a trade-in and getting prequalified for financing.
More importantly, it should result in less, if any, time waiting at dealerships and flexible options such as having the vehicle picked up or delivered – something Tesla Motors and other newer auto retailers such as Carvana have been doing for years. It’s a more flexible purchasing process that doesn’t have to be conducted during traditional business hours.
The coronavirus pandemic, according to Jackson, has been an accelerant to online sales for the industry, which has been reluctant to adopt such processes due to fear of disrupting their profitable showroom operations.
AutoNation, according to Jackson, has not experienced any declines in profitability from sales conducted online versus those in a traditional showroom.
That doesn’t mean showrooms won’t be needed going forward. It’ll just be different, including new sanitization processes and a larger combination of online and in-person sales, according to Jackson and others.
“I think the bar has now been raised for any company that wants to perform in this marketplace is you need first-class digital capability, you need a safe environment for your customers and a safe environment for your associates,” he said. “That is the Holy Grail going forward.”
The majority of buyers for Sonic Automotive during the pandemic have continued to want to visit dealer showrooms and test-drive vehicles before deciding to purchase, said Sonic CEO David Smith.
“The customers do want to come and shop and look at the vehicles,” he told CNBC during a phone interview. “In many cases, they do the majority of their shopping online, they may even narrow down the exact vehicle they want prior to coming to the store, but they want to set an appointment, test-drive it and make sure they like it.”
With average transaction prices of new cars and trucks nearing $40,000 this year, vehicles are not a discretionary purchase. Smith believes it’s partially the price as well as consumers wanting to verify they like how the vehicle drives and operates that’s causing such consumer behavior.
About 15% of Sonic Automotive’s sales include delivering vehicles to a customer’s home. The North Carolina-based company operates nearly 100 new and used car dealerships in 12 states.
“We’ll see how this evolves over time,” he said. “I’ve been surprised more people haven’t taken advantage of it.”
Online sales ‘booming’
Daryl Kenningham, president of the Group 1 Automotive’s U.S. operations, expects the coronavirus will have a long-lasting impact on the auto industry and consumer purchasing behavior, particularly online dealer processes.
“They’ve been comfortable with it in other parts of their lives, but in automotive they haven’t been as comfortable with it,” he said. “They’re certainly more comfortable with it today.”
The auto retailer is focusing on providing a process that “moves customers seamlessly between the online world and offline world,” Kenningham said.
Online-generated sales, or sales that start out online, tripled last month to 7.3%, according to Paige Goodwin, director of Group 1’s retail strategy. That compares with 2.5% before the coronavirus pandemic.
“The usage of the tools themselves has really spiked,” she said. “We have seen the number of people increase but we also have seen the steps that they are taking go further in the process.”
Vehicle deliveries for the company also have increased from 5% or less to about 20%, Goodwin said
Group 1 is one of the largest auto retailers in the country with more than 100 dealerships across 15 states.
Smaller dealers are experiencing the shift to online sales as well. Mike Bowsher, owner of Carl Black Automotive Group, which has four dealerships with General Motors brands in Georgia, Tennessee and Florida, said about 80% of sales are now starting online.
“This propelled our entire company into the digital space,” he said. “Our sales are booming.”
The online sales aren’t completely supplementing the loss of traditional sales due to the coronavirus pandemic. But Bowsher believes that’s likely due to a lack of inventory after auto plants, most of which are reopening this month, being down since March due to the pandemic.
Bowsher expects to continue to shift his business to online sales and vehicle delivery.
“The traditional model may be fading or diminishing,” he said. “I don’t think floor traffic will go away 100%, but online is just an easier process for everybody involved.”
www.cnbc.com 2020-05-21 17:57:23