As auto dealers’ inventories continue to shrink, further production cuts recently resulted in “the largest single adjustment to the vehicle production outlook in what has been a turbulent past nine months,” according to IHS Markit.
In September, the new vehicle production forecast for 2021 was cut by 6.2% or 5.02 million units and by 9.3% or 8.45 million units for 2022. With multiple factors leading to further disruption to chip production in 2022, IHS Markit also reduced its 2023 forecast by 1.1%, representing 1.05M units.
Without a true end in sight, forward-thinking dealerships are looking for ways to secure their own future success in the automotive industry despite ongoing inventory shortages.
In this blog post, we share why enhancing your dealership marketing strategy is critical amid continuing disruptions and best practices for maintaining customer communication even with low or no inventory, including:
The Rising Popularity of Pre-orders
Despite ongoing inventory shortages, customer demand has remained steady until now.
North American automotive sales saw a strong recovery in the first half of 2021, increasing by 31% year-over-year according to IHS Markit.
However, as shortages drag on, new light vehicle sales have begun to shrink with August’s total SAAR the lowest since June 2020, according to NADA. With little sign that relief from new vehicle inventory shortages is on the horizon, dealers need to think proactively when it comes to engaging potential customers to drive leads to the sales department proactively in the sales process.
As long as your brand can support the process, offering pre-orders allows dealerships experiencing inventory shortages and delays the opportunity to continue engaging new vehicle customers.
Acquiring Inventory from Untapped Sources
When it comes to the industry-wide effects of the chip shortage, depleting new vehicle inventories is only the tip of the iceberg.
As new vehicle production continues to take a hit, consumer demand for used vehicles has risen, driving prices even higher than in previous months. In the first two weeks of September, wholesale used vehicle prices increased 3.6% from the month previous and 24.9% compared to 2020. As both new and used vehicle prices increased, average trade-in values surged, increasing by 70% year-over-year in August.
Faced with historically high auction prices and increased competition for pre-owned inventory acquisitions, auto dealers must get strategic to acquire pre-owned inventory from various sources in their market across their loyalty, service and conquest portfolios.
Using dealership marketing tools that integrate with your customer relationship management platform, your dealer management system, and service data, look for acquisition opportunities that are mutually beneficial and pass value onto your potential customers and stand out from the competition, such as targeting customers with the chance to lower their APR and payments. This strategy is particularly valuable as interest rates reach the lowest levels in more than a year.
Working the Service Drive to Increase Retention
As inventory shortages spur some customers to hold on to their vehicles longer, forward-thinking automotive dealerships experiencing low or no inventory are looking to their service drive to engage and retain buyers, keeping their dealership and services top-of-mind when it comes time for customers to buy.
In addition to being an invaluable source of pre-owned acquisitions, the service drive offers countless opportunities to proactively engage customers, build rapport and promote customer loyalty long after the initial sale. Satisfied customers and happy customers should be considered as valuable prospects in the sales funnel. Mastermind data finds customers who serviced with a dealer are 2.5x more likely to purchase their subsequent vehicle from the same retailer.
As dealer loyalty diminishes and brand loyalty falls for U.S. customers to a six-year low, it’s key that auto dealers leverage service drive marketing to promote customer loyalty and defend their customer base.
Using dealership marketing technology that integrates with your sales and service data, keep in contact with customers through conveniently timed and personalized service notifications. Outside of regular maintenance visits, look for additional opportunities to engage customers relevant to their evolving needs, such as marketing specific maintenance plans, service and accessory specials or complimentary vehicle inspections.
While to date the chip shortages have impacted some OEMs and dealers more than others, the rippling effects of ongoing production disruptions are proving why all dealers, regardless of their current day’s supply, cannot afford to pause their marketing efforts.