Not to mention that regulations require less driving, anyway. Travel on all roads and streets declined by 18.6% (50.6 billion fewer vehicle miles) for March 2020, compared with March 2019, according to the U.S. Department of Transportation. Personal travel around the country by car fell 46% year-on-year during the week ending April 17, according to Inrix surveys. We are driving far less, slashing the urgency to buy a new car.
“Consumers are going to realize they don’t need to replace their cars so frequently, and we are going to become used to keeping our cars longer,” he says. “Over time, that will reduce this sort of perpetual need to replace your car every three years. Buyer behavior is going to change, so the whole industry is going to change dramatically.”
Is home delivery going to stick around?
It depends on your dealer. But for most dealers, the time sales reps would spend dropping off and picking up cars to individual consumers’ houses for test drives or deliveries is not cost-effective.
“Margins at most dealers are under 5%, so you’re on a razor-thin margin, anyway,” Tynan says. “For used cars, the margin is about 7.5%. And the closing rate of driving a car to someone’s house for a test drive isn’t much higher than not. So how are you going to incur these additional [delivery] costs?”
On the other hand, Anspach says some post-Covid-19 dealers will be more willing than ever to service customers, however they want to be serviced.
“Whether it’s pickup and drop off—for a lot of dealers it’ll be: ‘The car will be here and running. I’ll text you when we are on our way. You don’t have to even speak to me,’” he says.
How will the auto industry recover from this?
In a word: trucks.
“A big part of the recovery, and we did see this in April, is that from the manufacturer to the retail channel to the dealer, the key is sellable products—and sellable products are trucks,” Tynan says. “If you’re going to dig out of this, you’re going to get your best shovel. And it’s just simply trucks.”
Indeed, according to Bloomberg Intelligence, 75% of autos sold in April in the U.S. were light trucks (which includes SUVs). Hyundai, for one, has taken advantage of the numbers: By April, Hyundai had increased its truck mix by 11 percentage points over 2019, up to 54% trucks from 43% trucks, and adding such models as the Venue crossover.
“When you think about the revenue and the profit side of the business, that’s where you have to live,” says Tynan. “You want to do more with less. Volume is going to be beat up for a while, so you have to have the higher revenue contribution and the higher profit contribution. That’s just the way it’s going to be, so at the retail level, that’s the mindset: Give me trucks.”