BG Independent News

The effects of COVID continue to linger beyond health care — in places like scarce retail shelves and scarce car dealerships.

Previously crowded car dealership showrooms have yet to rebound – still crippled by computer chip shortages and supply chain delays.

For people buying vehicles, that means little choice, long waits and higher prices.

For dealerships, that means layoffs and a change in the way customers buy cars.

Brett Kime, sales manager at Thayer Chevrolet in Bowling Green, recently spoke about the ripple effects of the pandemic on the auto industry at the Bowling Green Exchange Club.

Before COVID, car dealerships could offer hundreds of options to customers buying new or used vehicles, said Kime, who has worked at Thayer since 2015.

It was common for a customer to seriously examine five or more cars, test drive about four, and discuss pricing for a few options. Within days, a customer could be driving home with a brand new vehicle.

With over 120 cars on the lot at Thayer, it was not uncommon for a vehicle to be at the dealership for 200 days before being sold.

“If you sold it in 90 days, that was great,” Kime said.

Then March 2020 came – shutting down some business sectors, but not yet weakening the automotive industry.

“We were relatively stable during the pandemic,” Kime said. “We were considered ‘essential’ so we had the luxury of staying open.”

But then the unfortunate decision was made by automakers to cancel microchip orders, based on the belief that demand for vehicles would dry up during COVID, Kime said. This, coupled with the shift from microchips to the computer industry as more and more people have started working from home, has left the automotive industry paralyzed to meet customer demands.

“All of this has weighed heavily on the demand for chips,” Kime said, explaining that the typical vehicle contains 300 to 400 chips.

The result is a very different market for customers buying a new set of wheels. For example, before COVID, sales lots were filled with a rainbow of colorful cars. Now, this color palette is limited.

“Now it’s ‘this is what we have. Do you like it?'” Kime said.

Instead of about 100 cars, his dealer can now have 10 cars for sale. And they are usually sold out within a week of arrival.

“A lot of our cars are sold before they arrive,” he said. “I don’t think we’ll have 100 vehicles in the field anytime soon.”

Before COVID, customers could order a custom vehicle with the longest wait time of around eight weeks. Now, custom vehicles take eight to 12 months, Kime said.

And often these vehicles lack certain features. It’s not uncommon for cars to be sold to buyers with options such as heated seats or blind-spot monitoring to be fitted later when parts become available.

The impact goes far beyond the new-car market, Kime explained. Auto service departments are running out of parts and rental cars are hard to come by. Used car prices have skyrocketed. And people involved in car accidents have no luck getting their vehicle repaired or getting a lease.

Lightly used rental cars used to be a good source of supply for dealerships. But that has “turned around,” Kime said, with rental companies now going to dealerships for vehicles.

Consumers – especially when gas prices were higher earlier this year – were hesitant to visit dealerships only to be disappointed by the lack of options. So 90% of car deals now start online or over the phone, Kime said.

“They want to know he’s there before they leave,” he said. “They do all the research before talking to you.”

It changed the set of firm, face-to-face handshake transactions that local dealerships have relied on for decades.

“The ripple effect of the pandemic isn’t just time and fewer features,” Kime said.

Services like Carvana allow potential buyers to make car purchases online.

Traditional dealers have the option of making deals with potential buyers across the country, for more money, or selling their stock locally.

“We chose to put our local customers first,” Kime said.


JM&A: How dealerships can adapt F&I to EV buyers


Buick buys out dealerships that don't want to sell EVs

Check Also