The crisis is far from over, trends from 2020 are likely to spill over into 2021, and COVID-19 will inevitably continue to be a catalyst for change in our industry.
As I write this column, the clock ticked down on 2020, and like most people that I know, I am quietly thinking to myself: “Thank God.” For 2020 has been a year like no other for all of us.
There has been no other issue in my lifetime that has so impacted — not only our economy and our work, but our actual lives and how we go about living and interacting with one another, like the COVID-19 pandemic.
By the time you read this column we will be into the start of 2021, and while my hopes — along with those of most — will be that the world will have a certain amount of optimism that things are getting back to “normal,” that may or may not be the case. While the initial shipments of the various vaccines have just started, by the first half of 2021 we should have a clearer picture of just how and when the vaccines will be made available to the majority of Canadians.
That said, I would suggest that there actually will be no “getting back to normal,” because I believe that the virus has fundamentally changed a number of things about how we live and work that are not likely to go back to the way that they were pre-COVID. And that may not be a bad thing.
One of the things that this crisis has taught each of us, both personally and professionally, is what is important and what is essential. With respect to our industry, when the economy gets shut down (like it did last April), factories were shut down globally and in most provinces dealerships were shut down with the exception of service operations, which were deemed by most governments as essential.
These shutdowns taught the industry a number of things; for instance, vehicle manufacturers became evermore acutely aware of how global their supply chains really are, and also how vulnerable. This is especially true with some of the complex electronic components of not only traditional ICE vehicles, but especially for electric vehicles for which certain regions of the world are almost the exclusive suppliers of such components.
For dealers, my observation has been that the changes have been somewhat nuanced with the pandemic. Most dealers are very entrepreneurial, nimble, and innovative and in many ways doing business in a COVID environment has simply hastened many of the changes that were already underway as dealerships moved to digitize their presence and the car-buying experience.
Moving the vehicle purchasing experience both online and into a touchless delivery experience spurred innovation, and likely favoured the dealers that had already been well aware of this trend and had been pro-active with their digital presence.
For all of the challenges the virus had brought to the industry, it has also brought opportunities. New consumers in the form of those that used public transit and/or ride-sharing services because they were convenient or because they were affordable transportation, emerged as active participants in both the new and used car markets.
For all of the challenges the virus had brought to the industry, it has also brought opportunities.
Public and shared transportation were perhaps rightly seen as high risk activities during a pandemic and this new component of personal vehicle demand, combined with the fact that vehicle production was shut down for a number of weeks, has resulted in reduced new vehicle inventories, generally meaning higher profitability for dealers on the vehicles they did have and were able to sell.
Likewise, the lower-than-normal new vehicle inventory levels and new auto purchasers with limited budgets also put pressure on used vehicle inventories, resulting in generally higher profits there as well.
The same can not be said of the parts, service, and collision sides of the business. With fewer people on the roads there have been fewer accidents, and with fewer reasons to drive the family vehicle there will be less reason to service the vehicle — and what servicing is done will be done on a longer timeframe.
While the industry had been expecting a year that would be down significantly as a result of the pandemic, it seems likely that where vehicle sales will land, for 2020, could hover around 20 per cent below the 2019 level of 1.9 million and change. So all in all, it indeed could have been worse.
There are some other changes that occurred during COVID-19 as well that seems likely to persist for the foreseeable future, with respect to our industry, and that will have significant impacts on other public policy goals.
For instance, vehicle kilometres travelled by the on-road vehicle fleet will be down significantly in Canada for 2020, owing to people both losing their jobs but more importantly vast swaths of people working from home. Vehicles driving fewer kilometres will also translate into at least a one-time downward spike in greenhouse gas emissions (GHG) arising from light-duty passenger transportation.
For all of the challenges the virus had brought to the industry, it has also brought opportunities.
It will remain to be seen how much both of those trends continue in a post-COVID vaccine world.
It is fair to say that employees and corporations have come to understand both the benefits and efficiencies that can arise from employees working from home — beyond simply better protecting them from the virus. There will likely be more people continuing to work from home or with flexible home/office work protocols that would not have been considered pre-COVID.
While this trend could potentially be problematic for new vehicle sales, the other reality is that people may not be working from the same home that they did at the beginning of COVID.
What this trend may mean is that those folks will want to make a new vehicle purchase to ensure that they not only have a vehicle that is reliable for getting them around their new community, but also for the longer trips into and out of the urban centres for shopping, work, and more.
The pandemic is far from over, and I would suggest the impact of the virus on our industry — especially in terms of being a catalyst for change and innovation — is far from over as well. And so 2021 will be a good litmus test for the industry in this regard.
