AutoTrader has just released the next iteration of their Car Industry Bi-Annual Report, exposing search demand and supply data on cars for sale. The report covers the period 1 July to 31 December 2019, and one of the reasons we did that was because we realised that there is a big piece of market data missing. AutoTrader has exposed the data covers on live statistics, valuation data, price data and demand & supply data. This way car dealers and OEM car manufacturers can make more data driven and informed decisions.
When speaking to Simonne Dahl (General Sales Manager, BMW Paarlberg) & Mark Redjeb Used Vehicle Sales Manager, BMW Donford), BMW ranked highly in the consumer consideration set as the most searched for brand on AutoTrader. However, when it came down to variant search, Volkswagen Golf GTI’s were the most searched for variant in South Africa.
With over 27 million car searches conducted by body-type in the last 6 months and the average mileage of a used car sold being about 73,000km and the average car price being at about R288,000 during this period, Ford Rangers was the most sold car, whilst white is most popular colour by far – it dwarfs any other colour in the market.
We’ve also introduced a new part of the report called the Used Car Retail Inflation Rate. Here, we’ve seen a decrease of 0,4% between Quarters 3 and 4.
Consumer consideration is important
Mark Redjeb (Used Vehicle Sales Manager, BMW Donford) found the report fascinating and liked the fact that the data was scaled further down to car ranges i.e. SUVs, hatchbacks, coupé, etc. The average price of cars sold was R288,000 doesn’t fit in with any of the BMW’s they offer, whether new or a demo – not even close. Mark said “this average price reflects where car buying consumers are in terms of affordability – this trend I have noticed in the past 12 months, as consumers scaled down from higher premium cars to lower premium cars all to free up some cash.”
As a used car manager, it was imperative to use reports like these in order to help dealerships aggressively focus on their stock holding and value. By addressing these issues internally with Dealer Principals and Directors on how the market is quickly and always changing, especially now.
Simonne Dahl (General Sales Manager, BMW Paarlberg) commends BMW for an exceptionally well executed brand building job – this is why the consumer regards BMW as an aspirational brand. She also sees the Ford Ranger trumping the Toyota Hilux as interesting as maybe the person shopping for a Toyota Hilux is not necessarily online as much as someone else searching for a car. She perceives Toyota Hilux shoppers as those more likely to go into the dealership to enquire and actually buy one. What does that mean? The report not only gives car demand and supply data but also gives insight into the kind of customer that’s out there: one that searches online and the one that perhaps doesn’t. With 25 – 34 year olds being the main age the report refers to, those are the people who are tech-savvy who are on the internet. Meaning we have to acknowledge that the person shopping online could be a different kind of customer.
Those different segments still exist, thought small, that don’t necessarily shop online but are loyal to a dealership or brand and that’s again where car dealership brand marketing plays a pivotal role.
When it came to the VW GTI, Andile Dlamini (Head of Group Communications – VW) believes that the GTI is also seen as an aspirational brand and with the spread of age group, you have the young tech-savvy customers on AutoTrader, they would aspire to a BMW however because of affordability, they would default to a GTI. Someone might be looking at a Polo or Polo Vivo, but their aspirational car is a GTI. This means those who cannot buy a GTI will default to a Polo or Polo Vivo.
For VW the data is quite interesting as now that AutoTrader has published its data, consumers shop for the same brands across new cars and used cars. For example, on the premium side you have BMW, MercedesBenz and Audi and on the volume side you have Toyota, VW, being the most sold cars. Overall, the report is useful as you start to see the trends and resale values.
Sudhir Matal (Managing Editor of DoubleApex.co.za) couldn’t fathom South African’s obsession with bland colours (white). That feeling of being part of a vibrant, colourful rainbow nation is completely crushed. However, It’s no surprise that BMW is the most aspirational brand as the brand covers all kinds of car types, the affordability is what tips the sale scale away from BMW.
The correlation between what people are searching for vs. what they actually end up buying is very exciting for BMW and VW. The other important point to note is that both brands are trusted by South Africans.
I am glad to see that South African car buyers default to car brands that have assembly plants in our country. To me that means a massive show of support for everything local and South African. I always say that there is no such thing as a bad car, some may have bad road noise than others. But most cars do what they say they will do. I’m glad SA built cars are being searched for the most. The question is does the SA consumer know that?
The future of the South African used car market
The future of the South African used car market is online, and is gaining momentum. Some car dealerships are selling between 25% – 35% of stock outside their geographical location, to customers they have never met before or seen. But in all this, there has to be a high level of trust, or else that deal wouldn’t happen. The dealership trust trend is going to be key in making sure the digital presence for car dealerships coupled with rapid response times from sales executives turn into car sales. It is concerning though that the more seasoned sales people in the industry may not easily gravitate to the concept of maintaining a digital presence in the right ways that drive transparency and build the car dealership brand.
BMW’s has moved away from the traditional franchised business model to a new agency platform and has now offered a new paradigm in how BMW’s new cars are sold to the consumer directly, online. The lockdown seems to have further fast tracked everything. The only question is does your dealership now adapt or die? BuyBMWNow allows customers to engage with the platform, get feedback from car dealerships – all to make the consumer experience better. Being new car oriented, it has been easy to go ahead with a platform like this and with lockdown, this has forced car buying consumers to change.
Stocking your dealership
Andile Dlamini informed us that VW have cars that are always in-demand like the Polo, Polo Vivo and Golf so the demand from customers dictates which cars dealers should stock. As the dealerships are target driven, the dealerships focus on those that are in high demand so as to push volumes. There is an old adage that there are cars that if you place a sticker on them, they will sell fast. Others are fairly difficult to sell especially top sellers like the VW Passat which had to be discontinued due lack of demand. Toyota Hilux, Corollas, Fortuners sell on the brand name but at the same time you need to control the market as that will control the pricing with the resale values and the second hand car market. And if there is a car buying consumer demand, it keeps the price of new and used cars at a particular level.
Leading and lagging indicators
So, how do car dealers think of leading and lagging demand indicators?
I heard from the panel that car dealerships and OEMs look at historical sales to determine which of the cars sell better and which of the segments sell best and then dealerships then want to be in those segments. As a company you don’t want to be left behind so you follow trends like the growth of the SUV segment making sure we cover our bases across all vehicle types.
The disruption created by the internet has changed how consumers interact with content especially with used cars and new cars.
In the days of old, AutoTrader magazine, aka the creepy crawly killer, was once the first step for car buying consumers to look up cars for sale in the country. Now that consumer car buying journey to cars for sale is totally online. The car buying consumer is also much more informed and can search for “cars for sale near me”, or in any another part of the country. This is forcing car dealerships to take stock of what other competing cars are for sale is out in the market and box cleverly.
The internet has made is simpler for car buying consumers to shop for cars for sale outside their geographical area widening their options to what is available. This puts the onus on the car dealership to become more aware of what competition is out there both direct and indirect rivals.
The more the internet drives this car buying consumer transparency, the more price is not a competitive advantage. So, the more price is not a competitive advantage in the future, then what? What do OEM car manufacturers and car dealerships do because the more we have consumer transparency, the more we cannot play the car discounting game with cars for sale. Why, because everything, all prices, are transparent to both the car buying consumer and the car dealership.
Transparent demand & supply data
The next thing that’s going to become transparent is the automotive retail economic model. This means both car demand and supply data will become transparent to the car buying consumer looking for cars for sale. So is the industry looking at the future in a way that isn’t looking backwards all the time. I always say that “if you look in. the rear view mirror all the time, you will have a head-on collision”. Do car dealerships use leading indicators of demand and supply to stock their car dealerships, or is the industry still relying too heavily on the outdated lagging indicators of demand to dictate what dealerships stock? Using lagging indicators means the car dealership is subject to a push strategy from OEMs and could be behind the 8 ball in the used car market. If car dealerships use leading indicators of car demand to stock cars for sale. and then supplement their thinking looking at lagging indicators, the retailer is in control of a pull strategy.
And that’s what the AutoTrader Car Industry Report tries to do, it unpacks search data (Consideration), View data (leading indicator of demand), stock data (supply) and sales data (lagging indicator of demand) and tries to give a holistic view of how the internet is creating transparency for the car buying consumer searching for cars for sale.
Are car dealerships ready for this world of transparency
Searching for cars for sale and then ultimately buying a used car or a new car is an emotional process. We seem to forget the emotions one gets when buying a car. “Am I getting the best deal” (price) begins to break down with transparency and consumers have to consider everything else other than price. We’ve created this car price war ourselves. Now with the BMWs new platform you get to see all the pricing of all the new and demo cars in the country for BMW and that eliminates the price war by driving price transparency. BMW has mastered this as an aspirational brand, it’s about how a BMW makes one feel when driving to work in the morning. It may take time to walk away from price wars in the industry and rather set a “no haggle” price. Some car dealerships are already doing this and with platforms like AutoTrader that provide transparency for all cars for sale, it’s I an exciting future that I am looking forward to as the industry is definitely moving in the right direction.
In that kind of world if price is not a competitive advantage then brand becomes highly important and if brand becomes highly important then trust builds then once trust builds, then you can move onto evoking an emotion and then the sale.
The future is a data driven business
The future will definitely be based on data and if there isn’t a team dedicated to driving this in the future, you won’t be able to do anything. Global trends show how importance of data driven companies. Before consumers would rely on information provided to them by car dealers but now at a click of a button they can get average pricing across a range.
A NEW car dealership business model
Car dealerships are still necessary in the market as as the route to market for OEMs. Car dealerships will remain important but, what is changing is how OEMs ensure car dealerships are customer centric, how do we add touch points so that car dealers fully understand new automotive digital retailing technologies and prepare them for that kind of disruption.
New car sales are struggling worldwide. In the used car market however, it’s important to focus on stock holding and quicker turnover. Franchised car dealerships should grow the “off-brand” stock that has higher demand.
Car dealerships are therefore encouraged to build dealership brands because locality is important especially when it comes to used cars.
We should keep our eye on Tesla:
- First in the market to go direct to the consumer.
- We are only now seeing second hand Tesla’s in the market gain momentum, would be interesting to see where and how those Tesla’s get back into the hands of the consumers and does the dealership model become a reality for Tesla even if they don’t want it to happen.
Car dealership sales people also becomes critical. How do we handle when a lead comes in? How critical it is when you have the right people on board in your business…The people matter the most.
There is a future for car dealership, but it’s the form the car dealership takes that will change. People always want to buy cars from people that they can trust.
We are moving into a world where transparency is key and we’re moving a world where the consumer wants to know everything and that forces us to be customer centric and this will be pivotal in our businesses going forward. It’s very exciting times in the automotive industry.