There is no way around it. The automotive industry is changing. We have been discussing this trend for the last three weeks (Part 1 | Part 2 | Part 3). Even now as I write this, I know that the climate might be different by the time you are reading this. But that’s why I love being in this industry. There is so much change, so much growth. It is one of the tightest-knit groups I have ever been a part of. Together, we have weathered recessions, depressions, and even a pandemic. And it is with this stalwart attitude that we will persevere the uncertainty of tomorrow.
As for now, this semiconductor chip shortage is looking to stick around for a while. The result of this situation will be a production shortfall of about 1.5 million to 5 million fewer vehicles being manufactured in 2021. For comparison’s sake, in 2020, automakers sold 68 million units globally. That’s 13% less than the 78 million units sold in 2019 and 20% less than in 2017 when global auto sales peaked at 85 million units. Because of this, the expectation is that that shortage will cost the auto industry roughly $61 billion in sales over the course of the year.
The market will continue to shift in new directions as all the factors that go into buying a vehicle also tighten. It isn’t just the chip shortage that is posing a problem. All across the board, the price for materials to manufacture vehicles is increasing. Since May 2020, steel prices are up 182%. Aluminum is up 58% and copper is up 83%. On top of that, the prices of platinum and palladium, the precious metals crucial in making catalytic converters, are also soaring.
So how in the world do we maximize profitability with all of these uncertainties? From an active trade appraisal tool to a digital showroom, there exists a slew of opportunities for you to better engage with customers. You increase your visibility while dramatically enhancing your transparency. You need to be proactive and be having conversations about your technology solutions. Don’t shy away from creating a roadmap and getting ahead of the curve. We can’t predict what the future holds, but we know digital retailing plays a pivotal role.
Analyze your processes and use the available data to make decisions on how to approach your dealership. Be flexible and adaptable…but also be confident. In terms of transportation, cars aren’t going anywhere. While they might change in look, feel, and consumption, consumers will rely on your services for many years to come. Keep that in mind when catering an experience to their needs. Be upfront about the difficulties the industry is facing. In particular with trade-ins and appraisals, deliver an honest valuation of the vehicle and walk the customer through why their car is worth what you say.
Knowledge is key here. Continue to engross yourself with as much information as possible. Stay up with trends and be ready for change. Remember, you aren’t in this alone. MAX Digital is more than just a vendor. We partner with countless dealerships across the country and have open dialogues about what will work best for your lot. If you want to learn more about the challenging terrain ahead and how MAX Digital products can help you hold more gross, then schedule your free consultation today.