The start of a new year gives us a chance to introduce a new customer-focused mindset.
As 2023 moves to the rear-view, the automotive industry in Canada remains an unpredictable landscape. New car pricing and interest rates remain the top industry discussion topics across all segments and the four factors that affect pricing (vehicle supply, manufacturer incentives, dealer discounts and trade in values) have all seen major disruptions since the COVID-19 pandemic.
As reported recently by Cox Automotive, non-luxury vehicle prices have remained steady since January whereas luxury vehicle prices dropped by four per cent and EV by 19 per cent.
Notably, higher prices have caused consumers to consider more options when buying a vehicle and this is a crucial factor to bear in mind as we step into a New Year. So, what is in store for 2024?
Vehicle supply
Vehicle supply is improving, particularly for domestic brands such as Jeep, Dodge, Ram, and Chrysler with more than 100 days’ supply on the ground as of August.
These manufacturers have added excess inventory in anticipation of the Union Auto Workers Strike which began in September and negotiations rumbled on as I was writing this.
Imports are still struggling to reach pre-pandemic levels with Honda, Kia, Toyota, Lexus, and Subaru ranging from 28 – 44 days’ supply. However, the national average is 58 days which is close to the historical norm of 60.
New vehicle pricing
Elevated inventory levels should mean a drop in prices but with interest rates remaining undesirably high and a pent-up demand from lack of availability, many foresee new car prices to remain high throughout 2024. Increased supply has led manufacturers to re-introduce some incentives, making the market more competitive than we have seen in recent years. With so many uncontrollable factors impacting the industry, dealers can only be certain of one thing: continued uncertainty.
So as a dealer, how can you confidently compete? My advice is to focus on what you can control — your customer experience.
Shifting mindset
The effects of the pandemic undoubtedly made the automotive industry a seller’s market. Dealers became accustomed to selling vehicles at full price, even over MSRP in some cases.
They knew that if a deal was not made with one customer, another would come along and snap it up. Unfortunately, in many cases this meant that any quality sales process and customer experience went out of the window.
As vehicle supply continues to increase, manufacturer incentives make a comeback, and demand remains strong, dealers can no longer afford to circumvent the sales process. The power is back in the hands of the customer and providing an exceptional experience is one of the only tools dealers have to successfully compete.
This means shifting the mindset among your team and revisiting your sales process. Your sales team must work to build value for customers and work to earn their business.
They must assume that customers are shopping around and have options on which vehicle to purchase. For those newer to the business, remember that they have never encountered this landscape before.
Therefore, dealers must support their team in transitioning to a more competitive market and invest in training to ensure they have a good understanding of what makes an exceptional customer experience.
The power of exceptional experience
While a vehicle purchase for many is a practical decision regarding specific needs and budget, it is equally a very emotional decision. Customers need to feel connected to their dealership and feel valued by them. In recent years I’ve heard countless stories from friends and acquaintances about their experiences at dealers and few have been positive. If they did make a deal, it was due to the product rather than the experience and many have expressed that they would be hesitant to do business with the same dealer again.
As the industry becomes more competitive, we need to shift to a longer-term outlook and focus on providing an experience that will generate loyalty and retention.
The dealers that will succeed are the ones that focus on the customer over everything else, and truly understand what they want as individuals. They communicate with transparency, they build value, and they give the customer a sense of belonging at the dealership.
Doing so will enable them to build long-term relationships with their customers and keep their businesses thriving for years to come.
