The Year of Big Challenges and Creative Solutions
The auto industry persevered through another unprecedented year of challenges affecting every aspect of the business. Now, let’s look back at the wild ride that was 2021 and see what experts predict for 2022.
Broken Links in the Supply Chain
The COVID crisis left a lot of uncertainty in its wake. From shuttered showrooms to inventory challenges, automakers and dealerships have had hard choices to make.
The industry is still faced with a major shortage of computer chips. The pandemic brought on a tsunami of workers setting up home offices, forcing chipmakers to funnel their production to laptops, tablets, and other devices.
Even with that initial wave behind us, automakers are still finding it difficult to get the chips they need. And when you consider that the average vehicle can require as many as 100 computer chips, manufacturers were forced to decide whether to discontinue offering non-critical features or halting production altogether on less popular models.
The slowdown in auto production inevitably led to inventory shortages across the board. With fewer new cars, trucks, and SUVs available, buyers turned to the used lots, drawing down the supply of pre-owned vehicles. And what cars they do get are snapped up, sometimes within hours.
Although many plants have restarted production lines, as we close out 2021, dealerships continue their struggle to keep cars on their lots.
How Dealerships Faced the Challenges
How does a dealership prepare for this kind of disaster?
While there may be protocols in place to handle weather-related catastrophes, there was no playbook for dealing with a deadly pandemic. Once the initial shock faded, dealership management took stock of what was available to help them keep the lights on.
The Fixed Ops Life Raft
When the initial COVID wave cut off traffic to their showrooms, dealerships turned to their parts and service departments.
Reminding customers of upcoming regular maintenance and offering service deals and incentives brought people back. And the revenue generated helped many dealerships stay afloat.
Using Social Media to Circulate Inventory
You see the ads everywhere: “We Buy Cars” or “We’ll Buy Your Old Car!”
Facing a depleted wholesale used vehicle market, many dealerships boosted their spending on pay-per-click (PPC) and social media advertising to get a fresh supply of used cars. And with pre-owned vehicles commanding higher prices, dealers saw a high ROI on their advertising.
Mastering Online RetailLike much of the retail industry, dealerships that had already embraced a robust digital marketing strategy found it easier to ride out the most turbulent days of the pandemic. That was especially true of dealers who had developed a solid digital retail (a.k.a. online shopping) program. Not only did it offer car shoppers the ability to buy a vehicle from the safety of their home, but it gave dealership management a way to maintain much of their sales team by redeploying them to digital retail.
How Automakers Retooled Their Business Plans
It’s not just a pandemic pushing industry executives to rethink their business plans. The ongoing climate crisis and government pressure are driving major changes to the automobile industry.
The End of the Showroom?
Don’t worry, showrooms are here to stay! But automakers like Ford are pushing shoppers toward pre-ordering and custom orders rather than refilling showrooms with all the latest models.
This was driven in part by supply chain problems slowing down production lines. But with the success of pre-orders for vehicles like the F-150 Lightning and the Bronco, executives are finding that it’s more cost-efficient to build cars that are already sold rather than mass-producing models that don’t sell.
While other manufacturers, like Dodge and Chrysler, are pushing pre- and custom-ordering on popular models like the Challenger, there is concern among many dealerships that having a low inventory could cost them business.
After all, Americans are addicted to instant gratification.
While there is a willingness to order a customized muscle car or be among the first to pre-order a hot new model, will they be as excited to order and wait for “older” models? Or will shoppers just move on to the next dealership?
Accelerating Toward EVs
All of the major automakers have committed to producing a lineup of alternative fuel vehicles within the next 8-10 years. State and federal governments have put pressure on manufacturers to move away from internal combustion engines due to the climate crisis. However, an uptick in consumer demand is also motivating companies to produce more electric vehicles.
Hyundai Motor Group, the parent company of the Hyundai, Genesis, and Kia brands, recently announced that they are discontinuing investment and development of ICE vehicles and committing their resources to develop a complete line of electric vehicles starting in 2022.
General Motors announced its commitment to delivering 30 new global electric vehicles by 2025. And with the Biden Administration’s new infrastructure bill signed into law, there is even more incentive for car buyers to choose EVs, which means more incentives for automakers to produce them.
Looking to the Future: What Do Experts Expect in 2022?
From supply chains to used car prices and an emphasis on EVs and technical and business agility, we look ahead to see what the new year has in store for the industry.
What Industry Experts Have to Say
“We can only sell what we make, and we can only make what we get parts to build,” states Colin Couchman, Executive Director of Global Light Vehicle Forecasting at IHS Markit, regarding continuing supply chain problems impacting vehicle production.
Many experts don’t anticipate the challenges brought on by the pandemic to let up any time soon and find it imperative for dealers to adapt, or die. Let’s see what others have to say:
“Augmented Intelligence, artificial intelligence, machine learning, and digital platforms will be critical. Only advanced, modern solutions will be able to tackle the challenges. Increasingly, organizations will realize the value of smart analytics and machine learning/AI and will invest in solutions with these features built in.” – Peter Mathiel, Today’s Motor Vehicles
“On a more positive note, EV-curious shoppers will have a number of exciting launches to look forward to in the new year. And for all consumers who currently own a vehicle (and for many customers who currently lease a vehicle), they can expect to capitalize on the value of their trade-in since there’s no indication that used values will fall off a cliff anytime soon.” – Ivan Drury, Senior Manager of Insights, Edmunds.com.
2022 Insights from the Dealer Authority Team
Digital marketing (particularly with video), custom orders, and security are among the topics the Dealer Authority team has on their radar in 2022.
Google My Business Will Steal the SEO Spotlight
While we’ve identified that Google Business Profiles will be crucial to digital marketing success, we anticipate optimized accounts featuring videos, images, and answered reviews becoming a primary focus for 2022.
That being said, we’re also fairly certain that there are going to be a bunch of companies saying traditional SEO is dead and it is all about Google My Business, which is absolute nonsense.
With websites and developers across all industries struggling to navigate algorithm changes and mitigate issues like Google’s Titleocalypse, it’s more important now than ever to invest in your dealership’s SEO.
Franchise Dealers Will Lean into Pre-Orders and Agency Models
Our automotive crystal ball is also telling us that many dealerships will continue to shift to the new “Tesla” style selling format. They may have one example model of each vehicle in the showroom, but the bulk of sales will come from the process of shoppers custom ordering their vehicle, waiting for it to be built to exact specifications, and having it delivered straight to their doors.
Ford has been actively participating in that with their pre-order process throughout most of 2021. Meanwhile, Mercedes Benz is beginning to test out changing their sales model in Australia mirror that of Tesla’s. Deeming it an “Agency Model.”
Marketing Dollars Will Follow Users Down the TikTok Rabbit Hole
The amount of growth that TikTok saw in the past year cannot be understated.
Just days ago it surpassed Google as the World’s Most Visited Website. We’re certain that TikTok will become a more viable marketing platform to connect and engage with dealerships’ audiences. Especially as they released city-based geo-targeting on the ad platform, a major step up from the previous state-by-state targeting limitation.
TikToks won’t be the only type of video marketers will focus on in 2022 though. Video marketing altogether, including more walkarounds and 360 spins of current inventory on a number of different platforms will be used to more effectively engage consumers in the coming year.
Failure to Adapt for Some Means Fresh Opportunity for Others
Unfortunately, we also predict 2022 will be a big year for buy/sells. We anticipate that a number of older dealers won’t have the stomach for the change that is coming and want to cash out. And who’s to blame them? With the amount of ever-evolving technology that cars and consumers are steeped in, it’s tough to keep up, which brings us to our next prediction…
Data Security and Financing Options Will Get an Overhaul
Data Security is going to be a BIG thing for 2022. Every year we read about ransomware attacks on businesses and financial institutions alike so it’s important to lock up the family jewels. In this case that’s your client’s data! Just think of how many dealership processes are controlled by a DMS system that may get compromised.
A dark prediction, but one worth proactively working to avoid.
Another potential overhaul to the digital dealership game comes down to financing options and how they are advertised. As leases and loans took a major dip in 2021, banks definitely felt the hit and we expect them to do everything they can to improve their numbers in 2022.
One possible outcome includes future inventory and SRP pages becoming cluttered with financial institution buttons.
No longer will CTAs be focused on “Contact Us” or “Get Pre-approved.” Instead it’ll be, “Get Pre-Approved by XYZ Bank.” However, there won’t just be one or two, there’s going to be several of them.
Whew, We Made It!
Now that we’ve analyzed a number of predictions for the future, let’s pause for a moment. It’s time to congratulate yourselves for making it through 2021.
The COVID-19 pandemic—and all the chaos it spawned—has tested your resolve, your reserves, and your creativity. The fact that you and your team found ways to navigate these incredible challenges through another wild year deserves recognition.
What do you see for the automobile industry—and your own business—in 2022?