The COVID-19 pandemic has accelerated the move by consumers towards digital interactions with vehicle dealers, according to the National Automobile Dealers’ Association (NADA).
However, NADA chairperson Mark Dommisse said this was customer driven and was not prompted by dealers setting up formalised digital platforms for customers.
“It was customers sitting on their phone at home at whatever time and conversing with the dealer and that could have been through WhatsApp to direct sales. A lot of the time, half of our staff were not in the dealerships,” he said during a webinar on the future of automotive retailing hosted by Deloitte.
Dommisse said the pandemic kicked off a digital revolution across the world, resulting in much more home-based purchasing and people having flexible times and not putting that much mileage on their cars.
He said the lower interest rates managed to subsidise and keep the new car market going while dealers’ salespeople communicated with customers by any means possible, such as Facebook and WhatsApp.
“Facebook is the lead factor and 80% of new car leads for our brands came out of Facebook.
Dommisse added that this sped up the sales process and interactions between customers and dealers. However, if salespeople did not respond quickly, customers went to another dealer because they wanted an instant response, he said.
“This has created loads of impatience in the purchasing cycle, and I’d hope that dealers responded to that,” he said.
In addition, consumers got scared, resulting in some taking conservative purchasing decisions and deciding to buy-down to cheaper vehicles. However, Dommisse said vehicle dealers have been surprised by the demand for new cars, especially since the rental companies and government were not buying new vehicles last year.
He said the sales figures were a lot better than expected and dealers are now confronted with a situation where supply cannot meet the demand because of the shortage of semiconductors for new vehicles.
“We are effectively in a post pandemic recession where people are losing their jobs and yet people are buying cars. People are asking why and what is this,” he said.
Dommisse said there are a few reasons for the relatively strong demand for new vehicles, including the significant reduction in interest rates, while the massive increase in prices in new vehicles has created a huge demand for used cars.
He said the four percentage point reduction in interest rates also helped the used car market.
“You could buy a better car on a used car lot than the new car you had previously. That whole buying trend made such a difference to the used car market.
"Once all the rentals dried up and the manufacturers were not able to supply to the full extent to what they would normally, it created a very healthy situation for dealers because we are moving our stock very quickly and our holding costs are tiny,” he said.
However, Dommisse said there is the same “angst” among dealers because of the COVID-19 third wave and the impact this will have on consumer behaviour.
“You will see that we will struggle this month [June]. I don’t think it will be as good as it would have been had we not had all these infections. Dealers have adapted as much as they could but we are still a long way off from being on a proper digital seamless solution for customers to interact,” he said.
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