Let’s face it, order take isn’t as strong as it was. Yet, it is easy to mistake the seasonal change in the drop of consumer traffic for a more structural change in demand.
With inflation likely to remain in double figures for a while and the Bank of England predicting a recession, it would be easy to catastrophise about the state of the economy. It’s certainly true, that increased energy prices will lead to consumers tightening their belts and reducing discretionary income. The industry is facing challenges as consumer demand softens and supply chain issues continue to lead to production shortages.
The question we must ask ourselves is how much is a car a discretionary purchase? In most cases, it’s not.
When we hear talk that the market is falling off a cliff, I would point to the statistics that argue against this. The IMF forecasts the economy to grow by “4.9% in 2022.” This “growth projection is significantly above a 3.3% annual growth level forecast beyond 2022 for the medium-term.” (Leggett, 2022)
It is also worth taking into consideration the natural lull of consumer traffic that the summer holidays bring for dealerships. James Baggot, Founder and Editor-In-Chief of Car Dealer Magazine, noted that
“Car buyers will ditch holidays and nights out instead of turning down the chance to change their car if the UK enters recession.” (Baggott, 2022)
Most people are locked into some form of a car ownership cycle, whether this is PCP, lease, or another method of financing.
The reality is that those who use their car to get to work, have no choice. This will remain true, so long as unemployment doesn’t start to rise. The grim reality is that those most harshly affected by the energy price rises, are less affluent and less likely to buy cars from franchise dealers. It’s not fair, but it’s just true, and unless the government brings in high levels of targeted support, this will remain the case.
One thing we can be sure of is this change cycle isn’t going to end. Whilst consumers might choose to extend the ownership of their vehicles, this is just good news for the service department. Equally, for those that are forced to tighten their belt and purchase a cheaper vehicle, there are still opportunities for dealerships to add value. This could be in terms of selling the new vehicle, generating a part exchange, selling this part exchange and so on. There is always opportunity to make profit.
So, how do you make the best out of a market that is challenging?
We’ve talked before about the importance of being brilliant at the basics. So, let’s make sure our stock is well photographed and videoed, well priced, we have review content for consumers and our websites have got all the tools, in terms of price, payments and part exchanges. Businesses can make sure that when customers are ready to buy a car, they are ready to take the order. Follow up phone calls, respond to emails and be alert to customers on the pitch. Get these fundamentals right, by laying the groundwork, and you will be a winner. Get them wrong and your business will become a housing development.
Bibliography:
Baggott, J. (2022, July 6). Car Dealer Magazine. Retrieved from Car Dealer Magazine: 267551
Leggett, D. (2022, July 27). 2022 and the Global Sales Picture . Retrieved from JustAuto : 2022-and-the-global-sales-picture/
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