A new report by Deloitte Insights has been released that delves into the long-term effects that the novel coronavirus pandemic may have on the automotive industry. The report titled “How the Pandemic is Changing the Future of Automotive” draws potential ramifications from the economic issues that have suddenly been encountered around the world, as well as consumer response to those concerns. Data has been compiled from many resources including Deloitte’s own Global State of the Consumer Tracker that is released bi-weekly.
Somewhat Resilient Auto Market
The report found that the sales figures through May 2020 and into June were “encouraging in a few global markets” which includes the United States. Used car sales were down just 6 percent in May while new car sales were down 22 percent compared to pre-COVID levels. But some consumers have changed their buying intentions – nearly half of US consumers (47%) plan to keep their vehicle longer than they expected before the pandemic.
According to Deloitte analysts, it’s looking more like a drawn-out recovery is likely rather than a V-shaped recovery. With government assistance drying up, consumers will need to bear the brunt of the financial burden themselves.
Re-Engagement with Auto Industry Will Be Different
Digital retail took on a sudden and immediate role in the pandemic response for car dealers. Across all industries, in fact, consumers heavily engaged in online retail and remote sales practices. Amazon shares have risen by nearly 50 percent compared to pre-COVID prices. The rather slow-to-change auto industry has experienced the shift also, although only 1 in 4 car shoppers is willing to purchase online.
However, Deloitte State of the Consumer Tracker data reveals that 37% of US consumers are delaying large purchases in general. Engaging with car buyers online is now a necessity even though customers completing purchases are lower than previously.
Views of Mobility are Shifting
What customers think about mobility is different than just a few short months ago. In the United States, the need to maintain physical distancing is an influencing factor for 74 percent of car buyers who can “feel more confident in the level of hygiene in their own vehicles as compared to shared transportation options.”
Buyers are more likely to explore pre-owned models than previously as well as the average new car price was over $37,300 in 2019. Comparatively, the average price of a three-year-old used vehicles was nearly $15,000 less.
Combined with the expectation that manufacturing capacity utilization in the Americas is expected to remain subdued to less than ¾ capacity through 2027, and dealers can infer that the used vehicle market will become increasingly important.
Expect a Manufacturer Realignment
With lower utilization in the forecast and as the new car market takes time to heat back up, there will almost assuredly be carmakers struggling to stay relevant. Collaborations and mergers would not be surprising to make the automotive industry as competitive as possible. Deloitte Consulting LLP principal and global automotive sector leader, Joe Vitale, said, “Automotive companies should maintain manufacturing discipline, focusing on the vehicles consumers want to buy. Exploring strategic partnerships will also be increasingly necessary to maintain key innovation programs while deploying enhanced digital capabilities to identify and prioritize critical cost-saving opportunities.
Clearly, industry stakeholders that can use this situation to significantly restructure their operations will likely be in the best position possible to thrive going forward.”
What Car Dealers Can Make of It
Deloitte’s “How the Pandemic is Changing the Future of Automotive” report may seem like somber news at first. For the modern dealer, it opens up exciting possibilities for the auto industry that can see it thrive for decades going forward.
The industry is ripe for disruption, whether that’s with electrification, alternative mobility, subscription models, or simply with manufacturer realignments. There are many inspiring stories of dealerships experiencing record months of sales in the pandemic response, demonstrating the resilience of the auto dealer in challenging times. Monitor the state of the industry and adapt your strategies regularly to stay at the top of your game.
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