As the industry adapts to an unfamiliar automotive landscape, what new challenges will dealers need to face? On this episode of Inside Automotive, Brian Finkelmeyer, senior director of new car solutions at Cox Automotive, joins anchor Jim Fitzpatrick to discuss the most important takeaways from the last three months of automotive retail performance and what they signal for the future.
One of the chief observations made by Cox Automotive during the first quarter was the rapid return of new car inventory. “Total inventory is up about 70% from what it was a year ago,” explains Finkelmeyer. However, while this is an encouraging sign for dealers, he goes on to note that vehicle supply still lags behind pre-pandemic numbers by roughly 1.5 million units. Although some brands have outperformed others in terms of production, even companies that manage to provide steady shipments often see varying levels of availability between models.
Q1 also saw increased awareness of the growing affordability issue facing today’s consumers. Rising interest rates, inflation, and production costs have driven prices up across the market. “It’s just amazing to think that the average used car today has a higher monthly payment than what a new car did three, four years ago,” says Finkelmeyer. With the average new vehicle price hitting $48,000 in March, it is unclear if the ever-increasing costs of car ownership are sustainable or if sales will suffer from a lack of budget-friendly options.
Electric vehicles have sold astonishingly well since the pandemic and are expected to hit 1 million in annual sales this year, even as concerns still persist on whether the industry can afford to abandon gas-powered cars. While Tesla remains the market’s current leader, Finkelmeyer notes its position at the head of the pack could soon be challenged by legacy automakers and industry disruptors such as Rivian. Finkelmeyer remarks, “What’s going to be really interesting to see as these new entrants come online is if they’re going to able to capture the type of adoption and interest that Tesla has enjoyed.”
One of the major takeaways from Q1 is the need for shorter wait times at the dealership and better pricing transparency. Digital retail has quickly become an essential tool for storefronts to speed up the purchase process and make information easily accessible to consumers. But as more of the car-buying process shifts online, customers will develop greater expectations for the speed of in-store visits. The average time spent at the dealership rests at three hours, notes Finkelmeyer, while many direct sales apps, such as Tesla’s, can complete the process in minutes. In Cox Automotive’s recent car buyer journey study, shoppers tended to prioritize time over money. “Transparency in price and speed of transaction was actually even more important to people than price,” he reports.
This is not to say that traditional dealerships are incapable of competing with online or OEM-led platforms. Dealers have had decades to hone their customer service skills, while the first automaker forays into retail have encountered numerous problems. “You hear a lot of negativity around the Tesla experience once you need to bring it in for service, where I think the franchise dealer network in this country is lightyears ahead in terms of being able to take care of customers and their problems…” concludes Finkelmeyer.
