Auto industry trends and navigating the effects of Covid-19

The importance of prioritising aftersales and service


The automotive industry has experienced the severe impact of Covid-19. From disruption in Chinese part exports to interruptions of large-scale manufacturing across Europe, the aftermath of Covid-19 has placed intense pressure on an industry that was already experiencing a marginal downshift in global demand.

In this article, we will highlight the state of play with Australian economic indicators, what this means for the automotive industry, the importance of aftersales in your dealership, and some tips for your dealership’s success during these times, as presented by John Startari, Advisory and Assurance Partner at Deloitte in the third episode of More than tyres.


Australian economic indicators: Current state key figures


· Interest rates remain at 0.25%


· Unemployment rate rising at 6.2%, impacted by Covid-19


· Inflation for the March quarter at 2.2%, with wage gains fading and demand collapsing


· Exchange rate $0.65 AUD/USD, this has seen an 18-year low — a strong position for local goods and services and exports


· Global shutdown taking a toll, GDP at 0.6%


What does this mean for the automotive industry?


Figure one shows new vehicle sales from 2013 to the present. The green bars illustrate growth and contractions based on that month compared to one year earlier, demonstrating that between 2015–2017 Australia had the largest number of new vehicle sales recorded in the period, however in May 2018 volumes began to shrink, which carried on in the year 2019. The subsequent decline has been spurred on by the recent varied market conditions.

Throughout the month of April, dealership sales had declined by 50% overall across the industry, whereas aftersales departments were impacted far less, illustrating the growing importance of fixed operations in dealerships.


Additional data revealed that dealerships make 4 times more profit from their parts and service departments as compared to selling new and used cars, meaning parts and service departments have been and still are key contributors to dealership profitability.


On top of this, the aftersales departments contribute heavily to customer retention — if a customer can purchase a vehicle and maintain it in the same place (and rid themselves of multi-service provider hassles in the process) then they’re going to choose the dealership over its competitors every time. Ultimately resulting in higher customer retention for the business.


As we heard from John in our most recent webinar session, it is imperative that dealerships place a strong focus on service as they emerge out of the other side of the Covid-19 pandemic — and prioritising service business, while supplementing standard new car business, will aid in customer retention and satisfaction.


Here are some key tips to reinforce dealership profitability in the months ahead:


· Be transparent. Advise your customers of any new plans of operations (e.g. scheduled drop off times)


· Share your sanitation policies. Implement and inform your customers of your sanitation procedures


· Optimise the way you transact. Ensure infrastructure in place for the new ways of transacting (e.g. mobile EFTPOS terminal)


· Adopt a proactive, rather than reactive, sales approach. Put policies in place that prioritise phone, email and text offers to your customers and prospects.


· Emphasise that you are here to support your customers. Consider the tone and narrative of your messaging — you’re working to support your customers during this time.


· Maximise opportunities. Cross-sell and upsell for genuine requirements, as a service advisor you have a duty to advise your customers of essential repairs that will impact the safety of their vehicle


· Enhance your buy-now-pay-later options. These options offer flexibility and support during a time where your customers may have to tighten their belts (e.g. Afterpay and ZipPay).


· Ask for feedback. Conduct surveys and actively show how you will act on feedback received — it’s really important now, more than ever, to improve your service based on shifting consumer demand.


For a full overview of the automotive industry trends and the impact of Covid-19 watch our latest episode of our More than tyres led by John Startari, Advisory and Assurance Partner at Deloitte.