While the dealership world is hoping the inventory crisis will come to a speedy resolve, industry experts aren’t as optimistic. Embracing the challenges and opportunities ahead is the first step for dealers to secure their future success despite inventory shortages.
Below, we bust three common dealer-related myths surrounding the crisis.
Myth #1: Relief is coming soon.
Relief will eventually come, but “soon” may be too optimistic. In a recent report, IHS Markit forecasted shortages through 2022 and further reduced its 2021 global new vehicle production forecast to 74.8 million following summer declines. IHS Markit estimates 7.4 million units of global light vehicle production have already been lost this year.
In the September IHS Markit update, the company pronounced downgrades to its near-term (2021 and 2022) production outlooks (by 6.2% and 9.9% respectively) triggered primarily by a substantial worsening of signals received via ongoing supply chain channel checks.
So, when will new vehicle inventories normalize?
IHS Markit’s latest reports demonstrate declines are slowing. In October, IHS Markit adjusted its 2021 forecast by just -1.3% following a decline of 6.2% just the month previous. IHS Markit also expects double digit production growth in 2022 thanks in part to this lower base.
Additionally, as pandemic-driven lease extensions begin to expire, CPO supply constraints are expected to improve, providing a potentially lucrative opportunity for dealers to engage buyers and build loyalty through CPO sales.
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Myth #2: Dealerships with little or no inventory should pause marketing.
With fewer vehicles and high demand, some dealers think there’s no need to market. But the rippling effects of the crisis is proving why this is a short-sighted approach.
Staying in communication with customers has never been more important. As increased demand for pre-owned vehicles sends auction prices to new highs, auto dealers have been forced to strategize to acquire pre-owned inventory.
By taking a data-driven approach and staying in consistent communication, dealers are sourcing pre-owned vehicles from across their loyalty, service and conquest portfolios.
As interest rates reach their lowest in nearly a year, dealers can offer customers trade-in or buy-back offers. For example, some dealers have leveraged predictive marketing platforms to identify and engage customers driving in-demand models with negative equity or a higher-than-ideal interest rate with trade-in offers.
Similarly, the service drive has become another source of pre-owned acquisitions, offering opportunities to engage with customers through marketing campaigns that fuel trades and buy-backs, as well as keep dealers top-of-mind when it comes time to buy.
Myth #3: Loyalty customers aren’t going anywhere.
Ongoing inventory challenges are threatening dealer relationships with even the most loyal customers.
IHS Markit found overall brand loyalty dropped to a six-year low, undoubtedly due to the inventory crisis. At the same time, body style loyalty grew 1.1%, demonstrating customers’ willingness to switch dealerships or brands to get the style vehicle they’re searching for.
In combination with increased competition from online-only retailers, dealers need to ensure they’re staying in communication with their loyalty customers.
With personalized messaging that meets buyers where they are in their journey, dealers are retaining buyers despite inventory challenges. Instead of trying to shoehorn customers into vehicles that don’t meet their needs, some dealers are also looking at new vehicle pre-orders to retain buyers.
Similarly, as rising new vehicle prices have pushed some buyers to delay their purchase, some dealers are looking to their service drive to build rapport and retain customers. It’s critical dealers look for ways to stay in communication with service customers, such as marketing specific maintenance plans, service and accessory specials or providing complimentary vehicle inspections.
While relief is on the horizon, full recovery is a long road ahead. As setbacks further complicate the environment, forward-facing dealers must find new ways to secure their own success amid ongoing challenges.
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