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The ongoing conversations surrounding unexpected shifts in the automotive industry are not likely to slow down anytime soon. As Q3 comes to a close, we take a closer look at the trends we saw this past year, what they mean for dealers and consumers, and what can be predicted for Q4 — as well as the months to come in 2023.
It is important for dealers to be aware of the influential topics up for discussion in the automotive industry while navigating through the ongoing pandemic, which happened to lead to supply-chain issues that ultimately caused a microchip shortage for dealerships across the globe.
This product scarcity, along with other important factors surrounding vehicle types, prices, etc. are what dealers should gain expert insight into. By analyzing how the automotive industry has evolved, dealership managers can better train their sales team and, in turn, ensure upward trending sales for the future.
In this blog post, we’ll explore the state of automotive retail industry headed into the final quarter of the year 2022, including:
· The economic conditions and key indicators dealers need to know
· Key consumer buying behaviors and trends in 2022
· How Mastermind helps dealers navigate current and future conditions
· Forecasted auto sales opportunities in 2023
Current Economic Conditions Heading into Q4 2022
Over the past year, dealers have faced an increasing number of challenges. While in Q1, dealers saw the best industry-wide sales performance in years. By Q2, sales had cooled as inventory challenges continued. Q3 continued to see much of the same, as lack of inventory stemming from industry disruptions prevented sales from rebounding more aggressively and drove prices up.
According to S&P Global Mobility, August’s new light vehicle sales were predicted at an estimated 1.123 million units, equivalent to a 13.1 million at the seasonally adjusted annual rate. At the same time, S&P Global Mobility has noted increasing economic uncertainty is absolutely crimping Q4 consumer demand.
While profit margins incentives have reached historic highs, recent double-digit increases in new-vehicle prices are changing consumer buying behaviors. Brand loyalty among U.S. consumers for new vehicles dropped to an eight-year low in June, according to S&P Global Mobility.
The correlation between day’s supply and brand loyalty demonstrates the buyer’s willingness to shop around and defer to purchase the vehicle they want; this poses numerous challenges for dealers. As inventory challenges continue into Q4 2022 and Q1 2023, it’s critical for dealers to understand the value of proactively promoting customer loyalty and stay in continued communication with their customer base.
How the Mastermind Platform Can Help
As inventory challenges delay deliveries and extend the customer path to purchase, it’s important for dealers to take a proactive approach at engaging their customers. This process aims to prevent defection and conquer new customers who are shopping around.
Mastermind’s marketing solutions empower dealers to build long-term, transparent relationships with new and existing customers by providing predictive insights into which customers you should be marketing to, what offers will motivate them to buy, and how soon you should begin marketing to them.
Mastermind empowers dealers to go beyond equity mining tools and take a complete view of who is ready to purchase within their entire market. By analyzing predictor and trigger data, such as life events, household and sociodemographic data, personal behaviors, buying preferences, and hundreds of other factors, Mastermind’s Behavior Prediction Score® ranks each customer’s likelihood to buy on a straightforward 0-100 scale.
From here, Mastermind’s Behavior Prediction Drivers® provide the actionable insights and selling points vital to car dealership marketing as well as fuel intelligent, automated campaigns with personalized messaging tailored to each customer.
Forecasted Trends in Q4 2022 into 2023
Current forecasts from S&P Global Mobility show some good news on the horizon, noting U.S. light vehicle sales in August marked the first YOY (year-over-year) gain throughout all previous years. High profits and sustained consumer demand may prompt some dealers to pump the brakes on their dealership marketing; however, recent trends and forecasted challenges ahead emphasize why it’s critical for dealers to take a proactive approach to customer communication.
Despite August’s performance, S&P Global Mobility recently further downgraded their forecast on U.S. auto sales to be limited to a 14.1 million unit total for the year, a downgrade from the 2022 14.6 million unit calendar-year forecast published in July.
While customer demand is already being masked by the inventory shortages, dealers should expect to see higher interest rates and corresponding monthly payments likely continue to curb retail demand for the foreseeable future. Rate hikes by the Federal Reserve have led to the average interest rate on a new vehicle loan rising to 4.8% in May of 2022; this is the highest rate since pre-pandemic in March of 2020.
From an OEMs perspective, S&P Global Mobility notes many brands are increasing their efforts to search for ‘Lost Souls’ or ‘Orphan Owners’ — also known as the second or third owners/sellers of a vehicle. On the retail level, dealerships are using responsive messaging and targeting strategies that best match audience segments with inventory, adjusting monthly to align with available vehicles, explains S&P Global Mobility.
By taking a proactive approach to identifying customers before they return to market, dealers can gain a competitive edge when it comes to conquesting new customers — as well as defending their customer base from competitors’ marketing attempts.
How can dealers ensure success while keeping their employees, as well as customers, informed about the relevant automotive industry changes?
To ensure their team can continuously adapt to inventory challenges to achieve sustainable success, it’s critical for dealers to keep their finger on the pulse of the automotive industry. By understanding the economic trends shaping the automotive retail landscape, dealers can proactively plan ahead by:
· Adapting to financing challenges by creating a buying experience that speaks to customers’ concerns; this includes marketing F&I products like extended warranties and wrap coverage, or assistance in raising their credit score.
· Leveraging pre-orders, reserved orders, or even retail vehicles in transit to their dealership; this meets evolving customer demands.
· Utilizing dealership marketing technology to analyze data from their DMS and CRM; this allows for dealers to identify sales opportunities to proactively pave the path for customers to purchase their next vehicle at your dealership.
As car prices and financial conditions throughout the economy continue to waver, dealers should be concerned with maintaining inventory and providing the best options for their customers. This topic is wildly popular at the moment and, due to its continuous change, will likely continue to trend.
Contact us today to learn how we can help your dealership stay ahead of evolving economic trends.
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