Impact of COVID-19 on the Automobile Sector
Starting in March with the surge of the COVID-19 pandemic and the beginning of a worldwide quarantine, our country underwent a massive transformation. From health regulations to social practices, the economy, to simply our behavior, there is almost nothing the pandemic hasn’t impacted based on our population’s new adapted lifestyle. The automobile sector in particular was one of the hardest hit, as consumers around the world have faced health and financial concerns, and mobility remains strictly limited. However, the industry has seen several notable shifts directly as a result of COVID-19.
1. Used car sales have spiked
The used car market has undoubtedly been the automobile sector’s saving grace amidst the pandemic. This is true for a multitude of reasons. With folks wary about taking public transportation, or even the popular ride share options in light of social distancing and other health regulations, it may come as no surprise that there was a rise in intent to purchase private cars. That being said, in the early part of 2020, when first the virus hit, travel bans and and restrictions on imports and exports, plus the shutting down of car plants and factories caused many car dealer lots to starve for new inventory, that is before they shuttered their doors themselves. Furthermore, the country dipped into a recession, causing some consumers to tighten their purse strings, looking for ways to save some cash. Though according to dealers and analysts, some other consumers were compelled to use their federal stimulus checks on their set of wheels, striking while the iron was hot so to speak, since interest rates have fallen a good 5%. With car plants unable to get their new automobiles to dealers, plus a confluence of factors having consumers think resourcefully and responsibly with their money, it seems most people had no other choice but to shop for used cars. In fact, August and September alone had the fastest rate of used car inventory turnover in the past six years. In short, used cars have become one of the country’s hottest commodities.
2. Online car sales have spiked
Once car dealerships were among the many businesses deemed “nonessential,” resulting in their forced temporary closure, there were little to no options for consumers other than to shop online. This caused dealerships and car salesmen to reinvent the wheel a bit, and heavily lean into the virtual world. The ability to undergo the entirety of the process of buying a car, that is from inquiry to delivery, all online has gone from a luxury to a necessity in today’s world. In fact, it has become so necessary and successful that while governmental ordains continue to flow in hopes of mitigating the virus, this change could be long lasting, and even permanent. The National Auto Dealers Association and Roadster conducted a survey of car dealers regarding digital retailing to display just how successful this transition has been:
• 76% said they were able to engage their customers more online
• 61% said that digital retailing improved their efficiency
• 24% increased the number of cars sold per person
• 38% increase in the average number of cars sold per person per month since 2019
• 68% of customers said it took less than two hours to complete their purchase
Clearly, this displays a new level of efficiency for both, the consumer and dealer; one worth keeping. With consumers now becoming empowered to purchase their car online just as swiftly and easily as they purchase their car insurance online, plus new online companies offering a greater variety of models and custom features that can be shipped across states, the automobile sector is sure to continue seeing growth in efficiency, leading to quicker turnover, and therefore bringing in more money. Traditional car dealerships, such as CarMax and AutoNation are reaping the benefits of this surge, and are en route to recovery to their 2019 profit levels, seeing stocks rise as high as double where they were at the beginning of the pandemic. On the other hand, newcomers and exclusively digital car dealers Vroom and Carvana (dubbed the Amazon of online car sales) have taken the market by storm, proving that the online market has the power to prevail beyond the pandemic.
3. As a result, prices are driving up
Consumers beware, all of this means that it is currently a bit of a seller’s market, as used car sales are currently at an all time high, rising upwards of $700 from June to July alone, and not showing signs of plateaus. Studies show that many consumers agree that the efficiency of online shopping and security of having a private vehicle during these times proves worthy of the rise in price. That being said, it will be interesting to see how the prices continue to fare in the upcoming months as the future of the pandemic remains uncertain.
Though the road to full recovery appears to have a few twists and turns ahead for the automobile sector, it also proves to have exciting prospects and the potential for a long lasting shift into a new world. It sounds not unlike what is in store for the rest of us. With a little optimism and adaptability, anything is possible.