Can a pandemic be made a positive?

Cars

COVID-19 has made a hot, steaming mess of much of the Australian economy in the past 18 months, with few sectors having made it this far unscathed.

The car industry is no exception, with nearly all car companies reporting reduced traffic in dealerships and rolling issues associated with stock shortages1. For consumers, these shortages have meant higher vehicle prices and waiting weeks, sometimes months, before they can take delivery of their vehicle of choice.

In a recent interview, James Voortman, Chief Executive Office of the Australian Automotive Dealer Association (AADA), said there has been a ‘seismic shift’ in consumer behaviour in recent months with many Australians unable to take an overseas holiday and opting to purchase a new car instead1.

“There is a clearly a situation in which demand is outweighing supply,” Voortman said.

“While consumers are being asked to wait longer for their new cars, this is a global issue which has affected other industries, too,” he said. “We are as frustrated as our customers about the delays. However, anecdotally, talking to our dealers, they say customers are becoming increasingly aware and understanding of the delays." 2

It’s clear that COVID-19 is not affecting all makes and models of car uniformly, although nearly every supply chain has been affected in some way – particularly the supply of microchips, which are a vital component in modern-day motor vehicles1.

"It is incredibly frustrating, and you have to remember this industry has been doing it tough for some time,” Voortman said. “New car sales fell in 2018 and 2019 and in 2020 they fell by the largest margin on record, so our members are desperate to be able to trade.”

Opportunity in adversity

After almost three decades of record-low new-car prices, it appears car buyers are coming to terms with paying higher prices and long lead times.

The good news for dealers is that demand should remain strong for the foreseeable future3.

Tony Weber, Chief Executive of the Federal Chamber of Automotive Industries (FCAI), told the RACQ earlier this year that while many Australians have been negatively impacted by COVID-19, he believed there would continue to be underlying demand for new vehicles, particularly as people avoid public transport due to social distancing requirements3.

Weber said dealerships can rise to customer expectations and exercise positive measures while dealing with the uncertainty posed by COVID-19.

“It's important that dealerships put in place the facility to have cars serviced and that people can have access – with less contact, obviously – to get in and replace or buy new cars,” he said. “You've got to give confidence to the consumer about going in and having their car serviced because cars are going to be more important to us than ever in the next six months.”

He added that the present situation offers opportunities for dealerships to trial non-traditional methods of operating. Some car dealers, he said, were actively promoting initiatives such as virtual sales consultations, using smartphones for video tours of vehicles, online appraisals of cars for trade-ins, and contactless test drives (such as when a dealer brings the vehicle to the client and practices COVID-safe hygienic practices).

Further initiatives can be put in place by car manufacturers themselves. Weber lists the likes of set pricing (to avoid the need to haggle online), extended warranty provisions and better-equipped special editions as efforts that can be taken to satisfy customers’ needs.

He says making it easy for customers to gain advice and purchase vehicles and ancillary products online should be an important part of the dealer offering.

“Most, if not all, transactions can be undertaken electronically. I think it's important that both the dealerships and the customers work through this to make it happen.”


This article has been prepared by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL234708 (“Allianz”). Information contained in this article is accurate as at August 2021 and may be subject to change. 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. Any opinions expressed constitute our views at the time of the issue and are subject to change. Neither Allianz, nor its employees or directors give any warranty of accuracy or accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in this article.


1 https://www.caradvice.com.au/954166/new-car-buyers-are-getting-used-to-paying-top-dollar-and-waiting-months-semiconductor-shortage-report/
2 https://www.afr.com/companies/transport/new-car-delivery-delays-drive-motorists-crazy-20210512-p57r41
3 https://www.racq.com.au/living/articles/Car-industry-feels-effects-of-coronavirus