Industry Pulse: Automotive Turns to Service to Carry the Load During Coronavirus Epidemic
With Sales Down, Dealerships and Shops Reduce Staff, Expenses to Remain Open
Although some SCL partners reported a spike in new car sales immediately following a move by the Federal Reserve slashing interest rates to nearly 0%, most in the industry are relying heavily on their service departments to carry them through the coronavirus (COVID-19) epidemic.
On top of economic uncertainty, efforts to social distance – and stay home altogether – have all but forced many dealerships to lay off sales staff and cut positions in other departments beginning in mid-March.
WHAT’S GOOD IN AUTOMOTIVE
Although the news is mostly disparaging – from disruptions in supply chains to a dramatic fall in sales – service facilities are still operating. For now, according to SCL Customer Solutions Specialist Don Parker, that’s a win.
To keep from closing their doors altogether, dealerships and independent shops have laid off staff, reduced hours, and in some cases decreased the number of technicians in their service departments. Those measures, although unfavorable, have allowed doors to remain open and work to continue.
“People are still bringing their cars in for service, whether that be for repairs or maintenance,” Parker said. “And these guys will continue working as long as they can and as hard as they can. That’s the way of the automotive industry – you’ve got family run shops that have been in business for 30-40 years, and they’re going to continue to do whatever they can to keep business as normal as possible.”
WHAT’S CONCERNING IN AUTOMOTIVE
When customers are not coming on the lot, sales are not taking place. And when cars are not being used, service lanes aren’t as full.
Those two issues alone present the greatest challenges to the automotive industry, which relies heavily on service and parts departments for income. Even if near 0% interest rates were to bring customers in, dealerships don’t have as much opportunity to earn from financing and other hard adds like they normally would.
“Right now, you have layoffs happening, especially in sales departments. You have lower profits and you have the same expenses — including rent, which is pretty high at a lot of these dealerships because they typically have large pieces of property,” Parker said. “If this goes on too long, everyone is going to have a hard time surviving. If this were to go on for 90 days there are a lot of dealers that it would really bury without some support.”
OPPORTUNITIES IN AUTOMOTIVE
Right now, opportunities in automotive are limited, but if you have cash, there is always potential.
“Unfortunately, by the time this is all over with, people are going to be selling businesses for pennies on the dollar,” Parker said. “There’s opportunity for acquisition, but honestly I think most people are just looking for ways to minimize the impact. This will be a burden on everyone in automotive in some way, but there are opportunities to help minimize the effect of this over time.”
For many, that means reducing staff and hours, taking precautions for staff members who continue to work, possibly taking advantage of small business loans, reducing expenses and biding time.
Contact an SCL Consultant today
In a wide range of automotive, industrial and commercial sectors, SCL remains steadfast on its commitment to product and industry knowledge, performance satisfaction and superior logistics. We protect and optimize the machines that keep our country moving. For more information on how we help can help with services including bulk purchasing or managing inventory, contact an SCL expert today.