Here’s what’s cookin’ today in Transmission:
- Dealerships: Pivot to used vehicles to make up for low supply of new vehicles
- Uri creating hazardous conditions for carriers
- Industry news
Dealerships: Pivot to used vehicles to make up for low supply of new vehicles
Car dealerships everywhere have been hit with the pressures of low inventory caused by the pandemic and the semiconductor shortage. It’s a difficult task selling new vehicles when lot inventories are thin. However, with the right strategy, dealers can overcome disruptions in the automotive supply chain. I got the opportunity to talk with Lauren Donalson, senior director of accounts for PureCars, to discuss how dealers can take advantage of the circumstances thrown their way.
History 101: Let’s rewind real quick to the start of it all, just in case you’ve been off the grid for awhile. The chip shortage that started back at the end of 2020 has caused many manufacturers to trim production on a variety of models, including the Ford F-150, the nation’s top-selling pickup. Consumer demand hasn’t diminished even though supply is dwindling. Uninformed consumers are showing up to dealerships expecting the standard selection of new vehicles, unaware of the current state of the industry. How are dealers adapting to seize the opportunity from high demand? Used and certified pre-owned cars.
Demand for used vehicles is up. And, SPOILER ALERT, prices are up too. “We’re seeing record grosses,” Donalson said. “And you saw that really from Q3 onward of 2020 because demand is outweighing supply. You will see that for dealers as it pertains to the production decrease in the coming months as well.”
Her advice to dealers? Don’t be afraid to be aggressive. Inventory is being turned at record times as of late.
“There’s a saying that you make your money when you buy the car so you don’t want to overpay for what you’re acquiring,” Donalson said. “With demand outweighing supply, you can be a little more aggressive on specifically F-150 inventory but also on the other vehicles that are going to be impacted from the chip shortage.” It’s important to identify which vehicles generate the most consumer demand. Be smart and don’t overpay when acquiring used vehicles to fill up the lot.
With the shortage predicted to be felt through Q2 and Q3 of this year, how can dealers maximize sales of used cars? I’m glad you asked.
Donalson explained that “it’s all about observing what is happening with your circumstances [i.e., inventory or consumer behavior] and adapting to those things on the fly.” Ad partners, like PureCars, can measure if interest in certain vehicles is moving up at a significant pace in your specific area based on data collection. Dealerships can use that information to pinpoint exact inventory needs that meet consumer demand. There’s no need to buy a large quantity of Toyota Prii (the preferred plural term for Prius, who knew?) if consumers in your region are interested in pickup trucks like the Ford-150.
“We understand that trends are going to vary market to market, dealer to dealer, manufacturer to manufacturer,” Donalson stated. “Be in conversation with your ad partners on what they see in your market and follow their lead on how you can adapt to what consumer behavior is telling you in your market.”
The biggest takeaway from my conversation with Lauren revolves around the idea that dealers should be pivoting toward their circumstances. Demand is up, new vehicle supply is down. Adjust to used vehicles and call upon ad partners, like PureCars, so that consumers can leave the lots feeling satisfied with their purchase, even if it may not be brand new like originally expected.
Quick note on PureCars: PureCars is an auto advertising agency dedicated to serving dealers, dealer groups and OEMs with advertising in the digital space (think Google, Bing, Facebook or YouTube). Its end goal is to acquire dealer customers at the lowest cost per vehicle sold or lowest cost per repair order.
Uri creating hazardous conditions for carriers
Winter Storm Uri is pouring down here in Nashville, Tennessee. There are similar scenes across not only the Southeast but also the Midwest. Icy highway conditions are widespread and, as I’m sure we’ve all seen on the news, so are dangerous accidents. Here’s a quick breakdown of how the weather is affecting transportation.
FreightWaves SONAR allows users to analyze the freight economy and freight market trends, using the deepest set of historical freight data so you can stay ahead of the ever-changing market. The chart above compares outbound tender rejects to the weekly change in outbound tender volumes across the eastern half of the United States. The automotive network that spreads from Ontario, Canada, through Mexico is clearly shown by red dots that represent automotive facilities.
At a glance, most markets show that outbound volumes have either weakened or remained relatively flat. As the week progresses, there’s a strong chance outbound volumes should continue weakening due to carriers wanting to avoid the severe winter front. Tender rejects and spot rates, on the other hand, should rise as the front moves northeast (more on spot rates below).
Detroit, one of the most important markets for the automotive industry, saw a sharp increase in outbound spot rates around the end of last week when Uri began making headlines. At that same time, both inbound and outbound volumes saw a dip as carriers wanted to beat the storm or avoid getting trapped in the hazardous weather. These risky conditions are also the root cause of spot rate inflation. The power is in the hands of carriers right now and shippers and brokers are paying a pretty penny to move freight. Expect rates to remain high until the weather gives way.
If you’re out and about, stay safe and remain cautious.
- On Monday, Thierry Bollore, CEO of Jaguar Land Rover, announced that Jaguar will transform its existing fleet of performance sports cars to become fully electric. The automaker has aimed to do so by 2025. Land Rover will offer six electric vehicles by 2030 and has set a goal of making 60% of sales zero-emissions vehicles. The new strategy, dubbed “Reimagine,” will see Jaguar shift focus strictly on sports cars and away from SUVs.
- FreightTech firm Forager is expanding cross-border operations in Mexico. This expansion will strengthen the company’s existing presence as infrastructure in Mexico continues to develop. Matt Silver, CEO of Forager, pointed out that the focus has been on hiring bilingual candidates in order to communicate with carriers. Laredo, Texas, was identified as the next possible office location since it’s already home to a large pool of carriers and cross-border activity.
- Just like Spotify or Netflix, Hyundai is rolling out a subscription service for cars. Essentially, customers can rent out a car for six months and then choose to either renew the contract, change vehicles or cancel the contract completely. Hyundai says that this program won’t “cannibalize traditional multiyear leasing” since leasing eliminates flexibility to swap out vehicles. The entire program will be conducted entirely online and rolled out first in Europe.
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