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Dropping Down a Gear

By George O’Brien

Steve Lewis spends a good amount of each winter in Florida, and this year was no exception. He was planning on returning to the Northeast in late February, but eventually saw little point in doing so.

As February turned to March, there was even less incentive.

“I figure if you’re going to work from home, you might as well do it where it’s warm and sunny, and where you can play golf,” said Lewis, owner of Steve Lewis Subaru in Hadley, whose Florida address is the Delray Beach area.

But, make no mistake, he is, like most people, WFH, and from Florida he has a very clear picture of what’s happening at his dealership — and within the auto industry itself — during this pandemic. As it is for most all businesses, this an ultra-challenging time that comes with some learning curves and a great deal of uncertainty about what’s going to happen over the next several months.

Sales for March and April of this year are down roughly 50% from what they were over this same period last year, said Lewis, echoing others we spoke with on that estimate. Meanwhile, service work is better, but not as good as in ‘normal’ times. Meanwhile, methods of doing business have changed, with both sales and a good amount of service being undertaken with the customer never visiting the dealership.

And as the pandemic continues, many in the industry, including those we spoke with, said these trends will continue, to one extent or another, even after people are talking about this virus in the past tense.

“We saw this coming — we slowly started to see this change,” said Carla Cosenzi, president of TommyCar Auto Group, referring to everything from online buying to pick-up and drop-off for service work. “We were one of the dealers that believed this this was going to be the future, and I believe this will train the consumer on just how easy it is to buy a car online. And I think this will push online buying to happen for car dealers sooner than it may have if the virus hadn’t happened. But this was coming.”

As for volume of sales, it is obviously down dramatically, as those projections for year-over-year numbers would indicate. But they’re actually better than some people thought they might be, and they might get better still if consumers gain the confidence to take advantage of a number of incentives now being offered.

“I don’t think I’ve seen a better time to buy in all the years that I’ve been in this business,” said Lewis, who has a roughly a half-century under his belt. Elaborating, he listed everything from lower sticker prices to deferred payments; from gas prices now under $2 a gallon (and likely headed lower) to lower insurance costs resulting from people driving less.

Peter Wirth, co-owner of Mercedes Benz of Springfield, agreed that these incentives might be enough to inspire some people who were thinking about buying or leasing and needed something to incite them to action.

“There are some people where it doesn’t matter what the incentives are, they won’t buy a car, and there are people who would have bought the car with or without the incentives,” he explained. “And then there this is middle piece where you can maybe push someone over the edge — they’ll buy if they think they’re getting a really good deal. That has happened, and it’s probably going to continue to happen through May and into the summer.”

And if these incentives aren’t enough, there’s ongoing speculation that, because many car manufacturers have shut down entirely or shifted to making respirators or other products, there may come a day — when, no one can really say — when getting the model you want might become more difficult.

For now, the lots are full, manufacturers and dealers are providing incentives to help clear that inventory, and the world waits to see if and when the economy improves to the point where more people gain the needed confidence to make such a large and important purchase.

That’s the view from Florida, and right here in Western Mass. as well, as this sector works to drive through something that no one currently working within it has dealt with before.

Hitting the Brakes

Lewis told BusinessWest his main role at the dealership with his name on it is to act as a type of cheerleader for his staff. And in the middle of a pandemic, if that’s where we are, there isn’t much need for a cheerleader.

“I get people up and running, but the people who are there are maxed out,” he explained. “We’re bringing people back bit by bit because our business is increasing on a daily basis, but we’re certainly not there yet.”

Elaborating, he said maybe half the company’s employees are back at the dealership, with the service department “insanely busy,” as he put it, and sales working its way back, but volume still well off last year’s pace during what is traditionally a good time for dealers.

On the service side, Lewis, like others we spoke with, said there’s a lot of recall work being done, and some routine, or scheduled, maintenance, but certainly not as much, because people aren’t driving as much, and they’re less inclined to visit the dealership for service — even those who drive the brand he sells.

“Subaru people are very diligent — if they’re 200 miles over their oil change, they think they’re going straight to hell,” said Lewis. “They say, ‘am I OK, is everything OK?’ And we say, ‘yeah, you’re OK.’”

Meanwhile, much of the service work being undertaken doesn’t involve visits to the dealership anyway, as those we spoke with said the pick-up/drop-off method is becoming increasingly popular, and it is likely to stick once this is over. And even those who do come to the dealership for service can’t hang out in the waiting room — at least to the extent they once did — so they’re given a loaner car, even if it’s only for a few hours.

To conduct this type of service, a dealership needs to build an infrastructure, meaning both staff to do the picking up and dropping off and the loaner cars to be left with customers while their vehicle is being worked on. And those we spoke with have been doing just that.

Indeed, Cosenzi said TommyCar saw this coming and put an operation in place. It’s called TommyCar Go.

“We had the infrastructure in place before COVID-19 struck, so it wasn’t a difficult transition for us,” she explained. “We already had the loaner fleet, we already had the personnel in place, we already had the advertising in place and the website organized; for us, we were ahead of the curve when many other dealerships were scrambling to get their operations in place.”

Wirth said Mercedes-Benz now has a fleet of 40 brand-new cars and a team of staff members he would like to grow that is assigned to picking up and dropping off, a service that was starting to catch on before the pandemic forced everyone into their homes, but now has become much more popular.

“Consumers are adjusting to a new normal — they’re not done adjusting, but they are getting more used to it,” he told BusinessWest. “We’re doing more pick-up and drop-off than we ever have before, and we were doing a fair amount before that. And on the flip side, we’re very active with reaching out to people to get service campaigns or recalls that were pending that we would ordinarily just take care of the next time the car comes in.

“And some of this is going to stay with us; consumer behavior will change — it won’t be 180 degrees, but it will be different, and more people will be comfortable with pick-up and drop-off,” Wirth said, adding that his dealership is working to improve the process and is currently researching an app that will enable customers to track where the driver is and when he or she will make that pick-up or drop-off.

Providing Incentive

Meanwhile, patterns are changing on the sales side, again out of necessity. Consumers are doing their shopping online, and increasingly, they’re getting into a new car without having to get into the showroom. And often without leaving their home.

Buyers are directed to the dealers’ websites, the paperwork is now handled via e-mail and DocuSign, and cars are either picked up outside the dealership or, increasingly, in their driveway. And in keeping with the times, the cars are thoroughly sanitized before the keys change hands.

“These are hermetically sealed — they’re like an operating room when people pick them up,” said Lewis, echoing the sentiments of others and speaking for them when he said that dealers are doing their best to make sure buyers get a full tutorial on how everything works, even if the sales associate isn’t sitting in the passenger seat explaining each feature, as has historically been the case.

“Through the internet, we go over the car as best we can,” he explained. “And we invite them back in when this is all over for a complete tour of their automobile.”

Cosenzi agreed. “We’ve done a lot of FaceTiming and Google conferencing, and we’ve set up every kind of conference, from Skype to Google — whatever the customer wants,” she said in reference to creating opportunities to learn all about their car. “There’s been a lot of Webexing.”

As for sales volume, as noted earlier, those numbers are well off last year’s pace, but in some respects better than some might have expected given the damage done to the economy, the huge numbers of people now unemployed, and the high degree of uncertainty when it comes to the future and when the region and the country can return to something approaching normal.

“The way we’re tracking now, April’s going to be about 50% of what it was last year, which is better than we thought,” said Wirth, noting that all the sales have been handled online. “In the beginning, people were thinking that there was no business to be had, but gradually things improved.”

Cosenzi agreed. “There was a lull at the beginning when this first happened,” she noted. “I think everyone was in shock and was really scared. But now, the manufacturers have come out with so many amazing offers, we’re seeing people want to take advantage of that.”

Indeed, the incentives have come in a number of forms, from lower prices, to deferred payments, to protection if the buyer loses their job to COVID-19, and they are commanding the attention of many consumers.

Because most sales are internet-driven, Lewis said, he’s drawing business from a wider geographic area as people shop for the best deal.

“People are really shopping for the best dollar now,” he explained, “because there’s no sales personality involved in the sale; it’s all through the internet, and it’s all about who has the best price, and our pricing is such that we need to move their cars.”

Indeed, his dealership, like most at the moment, has plenty of cars. Lewis said his dealership has a full lot, more cars stored elsewhere, and it’s currently holding up cars at Subaru’s port of entry in Rhode Island.

“We have 150 new cars in stock, and about 100 used cars in stock,” he noted. “That’s about a month’s supply normally, but now it’s a two-months’ supply; we’re paying interest on them, so we’ve got to move them once the floodgates open; I could probably have 300 cars on site right now that are either delivered and on the lot or allocated to us, and we’ve held their delivery up because we don’t have any place to put them.”

Lots of Questions

If sales pick up, as some project they might, and those inventories are depleted, getting new supplies of cars might become more difficult until the manufacturers ramp up production again, noted those we spoke with.

But that day is far off, and there is still a great amount of uncertainty about what can and will happen over the next few months or even the next few weeks, as the stay-at-home order has been extended to at least May 18.

For now, dealers are coping with lots of cars, lots of questions, new ways of doing things, and trends that might become the new norm.

It’s all part of life for a sector that was moving in the fast lane but has had to drop down a gear — or two. Or three.

George O’Brien can be reached at [email protected]