Car dealerships continue to find opportunities in lockdown

I recently spoke to Bobby Petkov from MitMak Motors to find out how trading during lockdown has been so far. Even with fewer car buyers on the dealer floor, it seems like car dealerships are not only resilient but continue to find opportunities even in lockdown, by using data layered with experience.

How? Car dealerships have had to change strategy & tactics with a need to refocus and reprioritize, has made car dealerships like MitMak Motors successful to the extent that their current sales numbers reflect those of pre-covid times. Though uncertainty still exists, this shows that the automotive industry is a group of hardworking people.

The used car dealership market has a stigma attached to it with consumers, made worse by the situation we find ourselves in; COVID-19 is a continuous battle for car dealership which has led MitMak Motors to implement a two-phased strategy:

  1. Focus on getting a customer
  2. Add value to the customer

Bobby alludes to the fact that the current situation makes all car dealerships ‘naked’ and even though car dealerships can market as much as they want, but in the end your beliefs or business values will be exposed.

AutoTrader Car Industry report re-adjusts the way car dealerships do business

The latest Car Industry report published on 3 August 2020 is seen as a one that helps car dealerships, and the automotive industry, readjust the way they do business especially when it comes to buying cars. Because car dealerships make money when they buy cars not when they sell them.

Bobby reiterates that the level of detail in the report (e.g. top 10 brands searched for, helps car dealerships focus on where the game is). Even better, the data coupled with the level of experience that car dealerships have is where the magic lies. For example: if one goes back pre-locked down the ratio of double cabs i.e. Toyota Hilux versus Ford Rangers saw the Toyota Hilux take a bit of a dive, but the AutoTrader Car Industry Report shows that the Toyota Hilux is coming back. Meaning he will now have to adjust his buying to a lot more Toyota Hilux’s for Mitmak Motors.

AutoTrader – a marketplace to help buyers and sellers

And we’re now fast becoming what’s called a marketplace where we help buyers and sellers fulfil the car buying transaction.

Our aim: “To accelerate the transition to Automotive Digital Retailing by driving opportunities for transparency & efficiency””

The highlights of the AutoTrader Car Industry Report are:

  • BMW is the most searched for brand in South Africa
  • VW golf is the most searched for car variant
  • The average price of a car is R289,000
  • The average mileage of 75,000km
  • The Ford Ranger is the most sold car within South Africa, creating an opportunity for Toyota Hilux.
  • We’re experiencing a surge in searches for cars under R200,000.
  • We’ve seen a decrease in used car sales by about almost 12%, but that’s coming back very fast and we’re seeing it in the numbers.

Car dealerships can now leverage business data with experience

Car dealerships in 2020 are becoming businesses that leverage business data coupled with experience to re-engineer and identify the target audience and to see what’s working and what isn’t. So, with MitMak Motors, their car retail prices may be a little higher on a car because they have focused on, on low mileage – highly spec’d vehicles, which means they are targeting a certain car buyers and not the masses. MitMak Motors seems to have not only found but chosen their niche, they haven’t allowed the niche to choose them.

This doesn’t mean they won’t sell a R1 million car, but it’s because they’ve narrowed down their segment and they’ve stuck to what they know and are good at.

The impact of transparency on demand, supply and car pricing

We are beginning to see the impact that transparency is having on demand, supply and car pricing – all fuelled by the speed of change in the data. This is has impacted how car dealerships stock the dealership floor, how car dealerships price their cars.

It is not only important to constantly do research but also to readjust pricing to remain market related – an exercise he does weekly. That way, he doesn’t out-price his stock only to lose car buyers to his competition.

Car buying consumer shopping behaviour has changed

Car buying consumer shopping behaviour has changed – how? Because of the transparency of the internet, car buyers are becoming more and more informed before they come into car dealerships. Before a car buying consumer comes to the dealer floor, they want to know what they will be paying, what added benefits will they receive, what insurance options are included, etc. This shows to me that car buying consumers want car dealerships to be transparent. That way they can make decisions ahead of going to the dealer floor to collect the car.

Unfortunately, most car dealerships sell on car payments only – a strategy that may not be sustainable long term. Consumers will more than likely gravitate and choose those car dealerships who are transparent in the transaction with no hidden agendas. I.e. everything is transparent from start to finish.

Thanks to the current pandemic, things like transparency and Automotive Digital Retailing have accelerated and changed how car dealerships interact with the changing car buyer.

Automotive Digital Retailing is late!

While it seems like the car buying consumer is ready to start and finish the car buying transaction online and not on the dealer floor, Automotive Digital Retailing is late.

Some car dealerships may think that putting up forms (particularly for car finance) on dealership websites is Automotive Digital Retailing – it isn’t. While that’s a good first step, all the other backend functionality is what really transforms a car dealership to being an Automotive Digital Retailer.

We are still far from a fully automated digital processes only because a few challenges we face in South Africa for example, fraud & identity theft, dirty data sources, etc.

The car dealerships brand is what matters most right now

Whilst we see OEM’s still having control over new car prices, discounts and the actual sales process, the future is uncertain:

  • Are OEM’s going to go direct? BMW have already made positive strides in this area. Elon Musks Tesla has had a direct model from day 1.
  • Is the consumer going to gravitate away from car ownership to “user-ship”, ride sharing using shared autonomous vehicles and ride hailing. (The data in the AutoTrader car industry report indicates a renewed interest by car buyers in car ownership as a result of the pandemic).

The used car market however, is not as regulated. Due to transparent car pricing, demand and supply data, car dealerships can’t overprice a used car anymore. The more transparent pricing becomes, the more car prices be at equilibrium with demand and supply. Price is then less of a competitive advantage, where car dealerships will compete more at brand and service level than for being the cheapest.

Mitmak Motors is an example of this. Doesn’t have the lowest priced cars on the dealer floor but has reached pre lockdown sales volumes.

Extended suppliers to automotive industry can also benefit from the car data

The AutoTrader car industry report data can benefit to those third-party suppliers to the automotive industry. Tyre companies, parts suppliers, etc.

Perhaps by focusing on the top 5 or top 10 cars searched for data stock those tyres from the different suppliers and those tyres will then service the used car industry as a serviceable item that needs to be replaced. Partner with used car dealerships that keep the high moving cars on their dealer floor.

It’s evident that this data has a “butterfly effect”, not only for AutoTrader, but the entire automotive value chain supporting car dealerships to sell.

Data informs potential car buying consumers and the car dealer floor

Buying a car can be daunting for car buyers. Walking onto the dealer floor to buy the second biggest item in our lives is sometimes a scary experience even pre lockdown.

However, when basing car buying and selling on demand and supply and which cars are the most sold in terms of mileage, colour, price, etc, one can’t often go wrong. As a seller, make the reasons a car is priced up transparent to the car buyer.

That way the car buying consumer that has walked onto the dealer floor is happy that they have seen everything in the market and is less likely to walk out and continue shopping. The more transparency we create in this data for the car buyer, the more the industry and car dealerships benefit. At the end of the day, the retail market is king. Without consumer retail nothing else can work.

Let’s continue with the positive drive and mindset we have as a collective:

  • the used car retail industry in South Africa, dwarfs the new car industry by a factor of over two to one – there are more than two times the volume of used cars than they are in a new cars traded.
  • new car is under some serious pressure. The negative impact to a new car being under pressure is that new car acts like a feeder to used car.
  • third party suppliers (tyres and parts) are reliant on the automotive industry doing well in both new and used car retail.

It’s all interrelated, I don’t think any one of the industries sub-sets are mutually exclusive or can do without the other.