For the better part of seven decades, the Courtesy Automotive Group, one of the top car dealers in the U.S., has been known for its innovative solutions and a strong commitment to creating an excellent working environment for its staff. On this episode of Inside Automotive, host Jim Fitzpatrick is joined by Scott Gruwell, CEO of Courtesy Automotive, to discuss the past, present and future of retail automotive.
The pandemic was a complicated time for car dealers. Throughout COVID, the automotive industry both struggled with and benefited from manufacturing constraints, which made it impossible to meet demand but heavily increased profit margins from sales for OEMs and retailers. While factory shutdowns and supply chain disruptions continue to keep the business’s recovery efforts in check, dealer inventories have started making notable headways. Gruwell reports that his stores are seeing 28 to 30 days’ supply on average, although the numbers are often higher for domestic brands. Although he estimates that the sweet spot for inventory is closer to 55 or 60 days, he clarifies that the tight supply of new vehicles has been a blessing for both dealers and OEMs. Looking into the future, Gruwell hopes that car manufacturers will continue with the slow ramp-up of production. “I really ask them to hold the line and be conservative on their inventory levels,” he remarks.
COVID has also heavily influenced another area of car sales: digital retailing. While internet-based car sales were present well before 2020, Gruwell notes that consumer interest in buying online has risen substantially in recent years. However, despite some car dealers expressing concerns that brick-and-mortar retail is approaching obsolescence, he believes there will continue to be demand for an in-store experience well into the future. A handful of buyers may prefer the convenience of shopping through a business’s website, but there will always be those who like to be guided through more challenging parts of the process, not to mention those who want to see and test their new vehicles before deciding on a purchase. Courtesy Automotive, he notes, allows customers to choose the experience that best suits their needs, making its business model secure despite shifts in buyer preference.
Electric vehicles started to see surging demand in 2023 and have recently hit a new era of relevance. Just this month, the CNCDA reported that Tesla had outsold every other brand in the state during July, even beating Toyota, the long-time frontrunner. “We are all in on EVs,” notes Gruwell, “but…we’re gonna go where the customer goes.” While Courtesy Automotive is seeing an influx of customers interested in battery-powered cars, there are many who will continue to rely on diesel and gas well into the future. The dealership group recommends that car dealers take a two-pronged approach, prioritizing either electric or petrol-powered cars based on consumer demand.
Pricing has remained the most unstable and troublesome aspect of the market since the onset of the COVID pandemic. Car dealers have seen new vehicle prices rise substantially over the last four years, posing challenges to buyers outside the premium segments. These difficulties were compounded in 2022 when the Federal Reserve began to increase interest rates in an attempt to combat rising inflation, a strategy which the bank has continued to employ in 2023.
While it is difficult to predict where prices will trend in the coming months, Gruwell notes that car dealers will ultimately land on their feet. “We’re entrepreneurs: we’re gonna figure it out and figure out a way to make that bottom line strong,” he comments. One potential solution to this affordability crisis is leasing, a system that has seen returning popularity in the post-pandemic car market. Courtesy Automotive has seen an increasing number of buyers turn to leases in 2023 and expects the option to become even more popular throughout the year until prices and rates come down. “I think leasing is gonna continue to really be the tool to get consumers in new vehicles,” concludes Gruwell.
