Car buyers ride out the COVID storm

Last updated on June 23, 2022
Customers are showing their adaptability in the face of long vehicle wait times. How are dealerships continuing to meet demand?

The automotive industry, like others, has been hit hard by the COVID-19 pandemic. Two-and-a-half years after the virus announced itself, the sector is still dealing with the after-effects of forced business lockdowns, reduced manufacturer volumes, global semi-conductor shortages and shipping disruptions.

Arguably, the biggest disruption the automotive sector has had to contend with is an increase in vehicle delivery times brought about by chronic stock shortages. It’s an issue that will take some time to resolve itself. Supply is not expected to meet demand until the beginning of next year, although some customers may have to wait longer still for delivery of certain brands.

In spite of this, there is evidence to show that car buyers are finding ways to deal with COVID-related delays.

Keith Thornton, CEO of Eagers Automotive, Australia’s largest car dealership group, told the Australian Financial Review earlier this year that what we have seen is car buyers resetting their expectations about vehicle wait times.

"The car industry has always been an anomaly in that the second-largest purchase by a family has always come with an expectation of effectively immediate delivery when, at the same time, people are happy to order furniture and wait for weeks or months,” he said.

“Generally speaking, customers are aware that we are in a ‘build-to-order’ more than a ‘buy-from-stock’ environment and have adjusted their expectations accordingly.”

Many customers, it seems, are opting to order vehicles with their chosen specifications and options, and are reluctant to settle for anything less. Rather than make concessions on their vehicle of choice, they are digging their heels and riding out the wait.

Glenn Best, Senior Account Manager at Allianz Automotive, says the overall feeling among dealerships is that customers have grown accustomed to making allowances for vehicle delays and that it’s currently business as usual.

“Customers are aware they have to wait a significant time – and they seem to be planning around that, especially if they’re a fleet buyer,” Best says.

He notes there is nevertheless a percentage of customers choosing to buy a vehicle on availability rather than type of vehicle itself and that this factor is driving demand in the second-hand market.

“People are saying ‘I need a car’ and ‘I’ve got the money to buy a new one’, but they can’t get the style they want in any brand and so have moved into the used car market,” he explains.

In such cases, decision-making is being driven by lifestyle needs and wants. Late-model second-hand vehicles are appealing because they share many of the specifications found in the new vehicles that are being disrupted by the global semi-conductor shortage.

In particular, there has been greater demand than normal for four-wheel-drives and utility vehicles. During the height of the pandemic, when the only holidays possible were road trips, caravanning and off-roading adventures, buyers were looking at all available options to find the right vehicle.

Best says dealerships have risen to the challenge by educating customers about delivery delays at the point of sale, as well as keeping them informed during the waiting period.

“In the case of the smaller dealerships, it’s the sales team staff contacting the customers,” he says. “In the case of the bigger dealerships, it’s the customer care department maintaining that touchpoint.”

Best says Allianz hasn’t witnessed a significant change in customers’ insurance decisions during the waiting period. And he says dealerships have built an allowance for vehicle delays into the insurance sales process. Dealerships are making sure they abide by anti-hawking legislation by securing clear consent from the customer to contact them about insurance when it’s clear their vehicle is about to be delivered.

Australian Automotive Dealers Association CEO James Voortman has voiced his support for the way dealerships have handled long lead times for new vehicles, saying they have had to deal with “an unprecedented situation”.

He says selling cars is not an issue for most car dealers at present, but getting enough stock and getting it quickly is proving difficult.

“Yes, customers are having to wait for a while, but dealerships are still getting vehicles regularly,” says Glenn Best. “It’s just that they’re not quite getting the volumes yet that can allow them to catch up.”

Voortman adds that most consumers understand supply constraints are an industry-wide issue that is beyond the control of dealers.

Being upfront with customers about delays, and recognising they may be willing to play the waiting game, might just help dealerships manage expectations until conditions improve.

This article has been prepared by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL234708 (“Allianz”). In some cases, information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way.

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