June 15, 2020

COVID-19 Impact on Independent Auto Dealers

The arrival of the COVID-19 pandemic made significant changes to daily life through forced business closures, stay at home orders, and heightened fear of contraction. The convergence of these changes left many businesses forced shut and others with an altered business model and a dwindling demand for products and services. Many would-be consumers decided to stay at home rather than venture into stores and other businesses for non-essential needs. Although Georgia was one of the first states to implement reopening procedures the return to business, as usual, is still gradually unfolding. This has led to challenging conditions for many Atlanta businesses including independent auto dealerships. According to the Cox Automotive 2020 Q2 Dealer Sentiment Index, 76% of independent dealers identified the business impact from COVID-19 as the top factor holding businesses back. In addition, 54% of dealers identified staying in business as their top priority. These findings highlight just how deep the COVID-19 pandemic has impacted industry companies. To help clients, prospects, and others, Wilson Lewis has provided a summary of key survey findings below.   

About the Survey

Survey responses were collected via a recurring quarterly online survey of both franchise and independent auto dealers. The survey results are based on total responses of 1,140 dealerships comprising of 610 franchise and 530 independent auto dealers across the U.S. The survey was conducted between April 28, 2020, to May 10, 2020.

Key Findings

• Factors Holding Dealers Back – The survey wanted to understand how dealers’ businesses are being constrained. According to the report, 76% indicated business impacts from COVID-19, 62% economic conditions, 29% limited inventory, and 27% credit availability for customers. Other identified factors included competition, regulations, business credit availability, and too much retail inventory. Its clear economic conditions have created a significant amount of uncertainty impacting demand and confidence.
• Used Cars – Access to used cars is essential to keeping the lot full of options to attract additional foot traffic. The survey wanted to understand the demand, availability, and pricing pressures related to used cars. According to the report, the current used car sales environment was rated as poor, inventory levels are dropping to low levels while pressures to lower prices continue to mount. In addition, independent auto dealers also reported a sharp decline in revenue. These results reflect just how challenging the COVID-19 pandemic has been for dealerships.
• Top Priorities – Given changes created by COVID-19 many have had to adjust business priorities. According to the report, 54% indicated staying in business in general, 16% reducing expenses/cost-cutting, 10% improving efficiency in general and 6% retaining customers. Honorable mentions include retaining employees and gaining market share as important priorities as well. Not surprisingly, independent auto dealers are focused on how to stay viable through the pandemic and ready for recovery.
• Southeast Market Forecast – Given there are also regional factors that can affect demand there were specific questions asked to those dealers in the Southeast. Participants were asked to rate various factors on a scale from 1-100. According to the report, current market conditions were rated as 33 reflecting weakening conditions, expected conditions in 3 months were rated 60 reflecting increased optimism, customer traffic was rated 26 reflecting weak conditions and finally, rising costs were rated a 53 reflecting some operational cost increases.

Contact Us

As the recovery process continues the market should increase and impact many of the metrics outlined above. However, it is imperative to take proactive planning steps around cash flow and business credit to put the business in the best possible position for recovery now. If you have questions about the findings or need assistance with cash flow planning, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.