Dealership leaders could not have predicted what the future of the automotive industry was going to look like prior to 2020. It's been an unprecedented year to be sure, as obviously no one could have been prepared for a pandemic. After all, the last pandemic occurred a century ago.
Fortunately for the auto dealers across the country, OEMs helped dealerships overcome the negative financial impacts of COVID-19 by offering generous incentives. The largest of these was 0 percent or low APR programs. Along with other economic factors, people moved away from leases and toward taking out loans to purchase new autos per IHS Markit's report.
Thanks to OEM incentives and other factors, the automotive industry was resilient and continued to support essential businesses throughout the pandemic both with sales and service for their vehicle fleets. Here's a look at the future of the automotive industry and what dealerships can do to ensure success in 2021 and beyond.
In the start of 2020 before the pandemic forced stay-home orders, of those with leases coming to an end, 75 percent leased again in the January / February 2020 timeframe. That number dropped to 67 percent by July. In the same time frame, loans went from 25 percent at the start of the year to 33 percent.
Part of the reason for the rise in vehicle ownership is that people are opting to skip public transportation and ride share services as a means of transportation. Driving your own vehicle reduces the risk of catching a contagious illness. However, this leads to a potential new problem. That problem is the lack of parking, or in some cases, the lack of affordable parking.
Some multi-family residential housing and retailers are taking advantage of this. They're increasing revenues with parking by renting parking spaces on their properties. In urban markets, one-car households converted in larger numbers than anticipated to two-car households. Additionally, while fleet sales languished in 2020 – those buyers (such as vehicle rental companies) are returning to the market in 2021 alongside the continued trends above – all helping to drive demand.
The pandemic drove automotive factories to shut down or reduce their output. More recently, there has been a global shortage of microchips that has continued to put pressure on inventory levels and delivery. These are critical parts that are needed for many vehicle components including the engine. They are also used in every other electronic device, so the car industry is competing for their limited supply.
As a result, there are fewer new vehicles available for sale, making it harder to meet customer demand and desires. That said, with sales on the rise and no minimal floorplan cost, many dealerships are enjoying record profits thanks to high demand and lower overhead. Fewer cars mean higher prices. Here’s an example: In late 2020, the average price for a vehicle in the U.S. was around $40,000. That number was up almost five and half percent in the beginning of 2021.
You'd think with more people staying home, they would not think about buying vehicles. They go out less often, thus reducing the chances of vehicles breaking down and needing repairs. However, that's not the case. In addition, many states worked to help facilitate online-only purchases which were previously blocked – making it easier for buyers to transact online.
Apparently, buyers seek out new vehicles sooner than they did prior to the pandemic. IHS Markit data says the average customer re-entry time was an average of 44 to 45 months before the pandemic. Now it's 42 months. The report also shows the pickup segment has helped U.S. recovery as it acquired 5.5 percentage points of market share.
Word is that 2021 is going to be a big one for electric SUVs and trucks. Among other changes, manufacturers are finally producing affordable electric trucks. To show its commitment to an electrified future, GM has changed its logo to represent its path toward a zero-emissions and an all-electric future. The company plans to design and build EVs for every style and price point.
GM's old logo was a simple capital “GM" with an underscore. The new logo changes the “gm” to lower case with an underscore under the m to resemble prongs of an electric plug. The logo also changes from a sky blue to a royal blue to evoke clean skies.
Automotive research firm IHS's Markit analysis shows 2027 as the tipping point for accelerated EV adoption. Additionally, IHS Markit expects one in four vehicles on the road to be an EV by 2030. Driving change are policies targeting emissions from transportation and almost 200 signatories of the Paris Climate agreement that sets the framework for decarbonization of the global economy. The pandemic has hastened these efforts.
Additionally, the automotive research firm has found that EV owners remain loyal and continue to purchase EV. Even owners of hybrid vehicles tend to switch to EV. Drivers of gasoline and diesel are the slowest to convert to EV. However, gasoline has doubled the switch to EV from 2019 to 2020.
Another draw to EV is that charging speeds continue to increase. Vehicles with 300kW DC charging power finally hit the market in 2021 and will multiply every year thereafter.
Equipping vehicles with 5G network isn't just about a better and faster connection. It also delivers important features that will improve driving safety. This is known as V2X communication, which will use the 5G network. This capability will help prevent collision as vehicles with 5G can see each other and act when there's a problem.
V2X can provide do-not-pass, curve speed, and queue warnings as well as cooperative adaptive cruise control and platooning, blind intersection management, vulnerable road user alerts, traffic signal priority and optimal speed advisory, and emergency vehicle alert.
In early 2020, no one had an inkling of what was to come that would take over everyone's life for more than a year. As the world slowly finds its way to a new normal, a lot of doubts remain.
Nonetheless, all the signs point to automotive dealerships remaining an essential part of the economy, supporting communities and front-line workers. In addition, as crime unfortunately continues to increase in many urban areas, they also need to protect their assets, which can't be parked inside or in a protected area easily overnight. As such, dealerships must work to maximize security investments and gain, when it comes to remote video security, protect against broader losses as criminals become more brazen in their attempts.
Live video surveillance for dealerships stretches your investment dollars and delivers a quick ROI against traditional exterior security. At the same time, it offers many other benefits you won't find in other security solutions. Here are just three benefits of implementing a video surveillance system for your dealership.
Unlike passive security options, remote video surveillance is proactive and can deter crime before it escalates to a loss. A trained security consultant designs and installs security cameras in strategic areas around the dealership. Advanced analytics, using artificial intelligence type decisioning along with a trained monitoring operator work together to watch the cameras.
If AI detects one of many programmed scenarios, it alerts the operator who takes action as needed. It could be warning the suspect on the audio speaker or calling first responders. The operator can do this from a remote location watching the entire site so that criminals cannot hide.
The video cameras will also help reduce employee theft. Yes, unfortunately, employees are often responsible for the theft. That's because they know the security system and its weakest links. Check out this video of a dealership employee stealing car parts.
False claims are a problem at dealerships especially when customers get their vehicles serviced. They may claim the service team caused a dent or some other problem. Video surveillance records and saves everything.
If someone makes a claim, analysts can search the video to find proof. Thank goodness for video surveillance as this dealership avoids a liability claim as the video shows what actually happened. Liability claims are very hard to win without evidence. Video provides that evidence.
Video surveillance can potentially lower your insurance premiums. That's because it shows the insurance company you've taken steps to protect your assets and avert crime. This means your business lowers its risk and becomes less of a liability. Thus, the insurance company reduces the premiums. Some video surveillance companies will help you work with your insurer on this.
In addition to shaving insurance premiums, you can save on costs because video surveillance costs up to 60 percent less than security guards. This cost includes hardware, technology, and monthly monitoring. Many customers see an ROI within four months. As a bonus, video surveillance lowers liability and there are court cases supporting this fact.
These are just some of the benefits out of many. The automotive industry has security requirements that differ from other industries. You want to find a company that can design an effective security solution for your dealership. Done right, you'll stretch every dollar and yield a quick ROI on your security investment.