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Jul 17 2020

We are living in a strange time right with a pandemic (COVID-19) that has greatly affected people worldwide and shuttered economies. Millions of people in the United States are out of work (hundreds of millions worldwide) and many businesses have had no choice but to furlough or lay off their employees, or even worse, close their doors permanently.

As to be expected, the auto industry is one of the many hard-hit industries, especially vehicle sales, costing car dealers $2.6 billion in profits from March 2 – May 3, according to Forbes. Hopefully, we have seen the worst of it. Now the question is, “where do we go from here?”

In this article, we’re diving into some of the specific areas of the auto industry that have been affected by COVID-19 to discuss what a “new normal” will, or we suspect will, look like on the other side of this pandemic.

1. Online car shopping/buying and home delivery

As a result of the stay-at-home orders to help curb this virus, many businesses, including those in the auto industry, have been forced to move much of their business online. While digital retailing has been growing in the automotive industry for a while now, coronavirus has helped speed up adoption.

According to a Think With Google article, consumers value car ownership during this time and there is still a demand for vehicle purchases. Google has largely attributed this to a lack of public transportation during this time, which we’ll touch on later in the article.

I think many dealers will continue to see the value in digital retailing and cater to those that would prefer to make vehicle purchases from their home and take a test drive at the time of delivery. However, it doesn’t appear that consumers as a whole are ready to do away with the traditional dealership experience. A recent Bloomberg article shows that consumers are visiting dealerships again as the government has loosened its COVID restrictions, even at dealerships that offer digital retailing solutions. “What the crisis did was force dealership groups to improve the process.” We should expect to see a more seamless online/offline car buying process moving forward.

2. Virtual tradeshows

Some of the most affected businesses are those that rely on large gatherings, such as live entertainment, bars/clubs, sporting events, and other major events. The auto industry is no exception. They have experienced the affects with many auto shows/tradeshows being postponed or cancelled.

Although a much different experience, some industry shows have been moved online, including the FCA Autoshow. Will some of the major tradeshows also be moved online? It appears many of them, including Driving Sales Executive Summit (DSES), the SEMA Show, and the NIADA Convention & Expo are still on, many with increased regulations. Some of them may offer a virtual component for those no comfortable attending, or not able to attend due to limited capacities for a safer gathering.

3. Public transportation/ridesharing lose traction?

Not long ago, there were growing concerns that vehicle sales would suffer as ridesharing/ride hailing services started to take off. COVID-19 has flipped this business, and other public transportation businesses, on their heads.

Will people become solely dependent on public transportation again? It could be a while until people are comfortable using public transportation or ride shares. Many commuters may continue working remotely more frequently, or even exclusively, which will also drastically cut down on the demand for public transportation/ride sharing.

A study conducted in China, referenced in the Think With Google article, found that of “people surveyed in China who do not own a car, most responded that they intend to purchase a vehicle for health and safety reasons.” A Cars.com study also referenced a similar trend with nearly 20% of carless consumers reconsidering purchasing one.

4. Usage-based insurance

As a response to lower vehicle usage during the stay-at-home orders, many insurance companies were giving a 15-35% discount on insurance premiums for the months of April and May while vehicles were not being used for commuting. Here are some of the COVID-19 discount offerings from the largest insurance providers.

As people continue with a flexible work-from-home option, many may consider a usage-based insurance policy (UBI) to better fit their driving habits. Here’s how UBI works if you aren’t familiar.

5. Increased traction for home delivery of all products

One industry that has benefited greatly from this pandemic is home delivery services, especially food/grocery delivery. As such, many of their fleets have grown. For example, Amazon has ramped up hiring for 100k new job roles, many for transportation. This growth will continue feeding into the auto industry with more vehicle purchases, repairs, and use of fleet management software to keep up with their assets.

I think many people who were not leveraging delivery services regularly (or at all) prior to COVID, but have begun using them now, will continue using them going forward after seeing the benefits. According to a recent grocery shopping survey conducted by Brick Meets Click and ShopperKitOnline in March 2020, “31% of U.S. households (about 39.5 million total) have used an online grocery delivery or pickup service during the past month.” A previous survey conducted by Brick Meets Click back in August 2019 reported 13% of U.S. households (16.1 million) shopped this way. 43% of those survey respondents indicated that they are either extremely or very likely to continue using these online services.

6. Mobile auto repair

Speaking of the convenience with home delivery, what about home auto repair? This is a topic we’ve discussed before on our blog (view here), addressing the pros and cons for those looking to get into the mobile auto repair business.

Vehicle repair/service was deemed essential during the height of COVID-19, however there were many dealerships and private auto repair shops that temporarily closed. This situation has worked in the favor of mobile auto repair businesses, such as YourMechanic, that were able to provide online service booking and contactless appointments as well as (temporarily) free service for frontline workers.

There are several dealers offering pick-up and drop-off services, as well as online scheduling for their fixed ops department. In the ”new normal,” these offerings will be essential for dealers.

As we are seeing across the auto industry and every other industry, digital retailing has made many businesses still possible in some way, shape, or form, whether that’s purchasing a product online and having it delivered, or scheduling a service that can be done with no human contact.

A “new normal” will mean continuing to leverage these digital assets along with previous operations as a hybrid solution to fit each person’s needs.

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