Auto Industry Continues to Be a High-revving Engine
As the 2019 models continue to roll into area showrooms, area auto dealers report that sales remain brisk, at something approximating the levels of 2017, which was a very robust year for the industry. Meanwhile, a host of trends have continued or accelerated, including torrid sales of SUVs and trucks, a high volume of used-car transactions, and a heavy emphasis on improving the overall consumer experience.
Jeb Balise held his hand up with his thumb and forefinger barely a half-inch apart.
And then, for emphasis, he brought them even closer together.
“They’re down about that much,” Balise, president of Balise Motor Sales, told BusinessWest, referring to new car sales in 2018 (which still has a few months left, obviously) compared to a year ago.
Essentially, sales are flat, which, as Balise and others told us back at the start of this year, around President’s Day sales time, is a really good thing, because auto sales — an almost always accurate barometer when it comes to the national economy — have been rock solid the past several years.
“They’re just about the same as last year — down a tiny, tiny bit,” said Balise, adding that there is just that much less pent-up demand (resulting from cars, like their owners, living longer lives these days) this year than the past few. But there are still a number of other factors driving steady sales, including a still-booming economy, record-low unemployment, quality vehicles across the board, attractive incentives from the manufacturers, and more.
So sales are still humming, and Carla Cosenzi, president of the Tommy Car Auto Group, believes that at her four dealerships, sales are actually up from a year ago.
“We’re seeing an increase in 2018 over last year, and 2017 was a very good year for us,” she said, echoing Balise’s comments. “It’s not a significant increase, but an increase nonetheless, and 2017 was a really good year.”
Overall, 2018 has been a year when recent trends in the auto market have maintained their speed or even accelerated slightly. These include red hot used-car sales; white-hot SUV and truck sales (especially the former); growing interest in electric and hybrid vehicles, although they still comprise a very small segment of the market; and new levels of convenience for the consumer.
“We’re seeing an increase in 2018 over last year, and 2017 was a very good year for us. It’s not a significant increase, but an increase nonetheless, and 2017 was a really good year.”
Peter Wirth, co-owner of Mercedes-Benz of Springfield, which opened just over a year ago, says he’s seen all or most of the above at his dealership, a facility that has met or exceeded the lofty goals set for its first year of operation.
And that’s especially true in an often-overlooked but quite important segment of this business — the service department.
There are many qualitative measures for this, he said, especially the fact that the dealership recently hired its 12th technician, tripling the number it started with, for the 14-bay facility.
This surge in business in the service department stems from a variety of factors, from how long Mercedes models stay on the road to the fact that the next-closest dealership is in Hartford, said Wirth, adding that demand has risen steadily since the ceremonial grand-opening ribbon was cut — a clear sign that the new dealership has made its presence known.
SEE: List of Auto Dealers
“The floodgates opened, and in a good way,” he noted. “We’ve been at capacity for the next few days in the service department since the day we opened, and way we’re keeping up is by adding capacity so we can keep it at a reasonable timeframe for customers.”
“It’s been a 100% success story — we’ve never had to send a technician home early; we’ve never run out of work,” he went on. “Not just in the amount of work we’re getting, but also in the team we were able to build.”
For this issue and its focus on auto sales, BusinessWest talked with several area dealers to gauge the local market and the forces, well, driving it. Cars aren’t selling themselves, obviously, but in many respects this industry is on cruise control.
Pedal to the Metal
Those who spoke with BusinessWest said that, these days, the new models arrive at the dealership almost year round, unlike years ago, when all or most would be revealed in the early fall, to considerable fanfare.
Still, many new models do make their debuts as the leaves change colors, and thus this is a good time to take stock — literally and figuratively — of what’s happening at area dealerships and within this all-important sector.
First and foremost, said Balise, this remains a buyer’s market in most all respects, even though demand remains high, especially for those trucks and SUVs. That’s because supply is also high as the manufacturers continue to make product and dealers try to move it — usually with good success.
“All of the manufacturers are producing plenty of cars, and demand is off just slightly from a year ago — just enough to put the consumer in the driver’s seat, if you will,” he told BusinessWest. “Incentives have never been better — even for SUVs.
“It’s not because there isn’t demand,” he went on, referring specifically to the SUV segment of the market. “It’s more because all the manufacturers have them now, and they’re trying to grab their piece of the pie.”
The seismic shift (another industry term) to SUVs has been ongoing for quite some time now, but it moved to an even higher gear in 2018.
Indeed, all those we spoke with said sales of SUVs now exceed those of cars (sedans) for almost all models they sell. Overall, Balise said, truck and SUV sales now account for roughly 60% of all vehicles sold and leased.
And this trend toward SUVs extends to some manufacturers renowned for their cars, such as Volkswagen and Volvo, said Cozenzi. Indeed, as she stood in the Volvo dealership recently acquired by the TommyCar Auto Group, she was surrounded by SUVs — small, medium, and large — on the small showroom floor.
They’re all selling, at Volvo and other dealerships, and especially the smaller SUVs, said Cosenzi, adding that they appeal to drivers of all ages for reasons ranging from accessibility (they’re easier to get in and out of, for most people, anyway) to decent gas mileage.
“The smaller SUVs, like the Rogue [Nissan] and the Tiguan [Volkswagen], continue to dominate,” she said. “The Rogue is the number-one-selling vehicle at the Nissan store, and it’s been that way for a few years now.”
Even Mercedes is now selling and leasing more SUVs than cars, said Wirth, adding that the company passed that milestone in 2017, and the arrow continues to move upward.
Still, there are plenty of sedans to be sold, said all those we spoke with, noting that, overall, car makers are turning out quality, easy-to-maintain products across the board, giving consumers plenty of often-hard choices to make, thus motivating the manufacturers to offer solid incentives.
And soon there will be an intriguing new choice, said Wirth, noting the arrival — probably by early next year — of the Mercedes A class, an entry-level luxury vehicle, complete with some different bells and whistles, that should bring that famous nameplate onto more driveways.
“This opens us up to a whole new customer,” he said. “You might have someone attracted to this car not because of the Mercedes-Benz design or the Mercedes-Benz safety or the brand image; it might be just because of the technology in the car. You can say, ‘hey, Mercedes, I’m cold,’ and the temperature will come up, or ‘hey, Mercedes, I’m hungry,’ and it will list the restaurants. And this is in the car that represents the entry point, not the $100,000 model.”
Staging a Coupe
Looking back on his first year of doing business in the Pioneer Valley, Peter Wirth, who previously managed a Mercedes dealership on Long Island, said this past 12 months have certainly been a learning experience.
Among the things he’s learned is that this market is somewhat more conservative than the one he left — a trait that shows up in higher volumes of used-car sales as compared to new-car transactions and more sales than leases — and also generally less aware that Mercedes is now more affordable and therefore more attainable than it has been historically because of the introduction of entry-level models.
“We still have some work to do on the matter of affordability,” he told BusinessWest, adding that perceptions about the Mercedes brand being beyond one’s reach remain despite more than ample evidence to the contrary. And that goes across the board, for passenger and commercial vehicles alike.
But he’s hoping that area residents will follow the lead of Jeff Bezos, who recently ordered 20,000 Sprinters (a cargo van made by Mercedes) for Amazon.
“I’m sure he did the math before he placed that order — I’m sure he sat down and looked at the life-cycle cost, the reliability, the down time, and everything else. He’s a pretty clever guy, and the fact that they committed to us says something.”
To Wirth, it says people need to look beyond the sticker price on the windshield (and Mercedes is competitive in that regard as well with many models) and look at the other ingredients that go into the equation, such as dependability, maintenance costs, convenience, and the sum of all these parts.
“We’ve been having the conversations regarding affordability, but also about how this is an amazing value proposition,” he noted. “We’re still working on it, but we’ve made great headway.”
Something Wirth didn’t need to learn, because he knew it already, is how important customer service and providing convenience are these days, especially to time-strapped, increasingly demanding customers.
“Time is money,” he said, adding that the dealership works to save customers some of that precious commodity in every way it can, from picking up a car bound for the service department at one’s home to getting them in and out of that service waiting room as soon as possible.
Cosenzi agreed, and said the TommyCar Auto Group has responded with something called Click, Drive, Buy, a new program that enables someone to buy or lease a vehicle almost entirely from home and on the internet.
“Especially at our Volkswagen store, we’re seeing a lot of our customers complete the entire transaction online and just come into the dealership to take delivery of the vehicle,” she explained. “I don’t think we anticipated that it would be as popular as it is, but people enjoy the convenience; they like buying a car this way. And it’s been popular with people of all ages.”
As he brought his forefinger ever closer to his thumb while comparing sales this year to last, Balise emphasized, again, that anything at or near last year’s mark is quite good.
And while he didn’t want to make too many projections about 2019, because things can change quickly, as history shows, he implied that he may well be doing the same thing with his fingers this time next year.
That’s because the basic laws of supply and demand — not to mention an economy still in high gear — should keep this industry operating in what amounts to the status quo.
And that’s a high-octane sales climate.
George O’Brien can be reached at [email protected]