Car dealer management tactics with inventory shortages

Since the beginning of the COVID pandemic, car dealerships have been dealing with inventory shortages. Automakers shut down their factories as did many dealerships around the country when most of the states’ stay-at-home orders went into effect. 

As demand from consumers took a nosedive, a great deal of automakers responded with incentives and financing offers to help bolster consumer confidence. The good news is that this plan worked. The sad news is that it worked a little too well. As dealerships started to reopen, consumers started buying vehicles faster than production could keep up.

What’s really creating inventory shortages is the continued disruption in the supply chain. Labor shortages at the factories and at the nation’s ports. Cargo ships are sitting, waiting for berths while containers piled sky high are awaiting pickup, but the trucking industry is also experiencing a shortage of drivers. To top it off, countless automobile manufacturers have struggled with production delays and temporary shutdowns due to the global microchip shortage.

As a result, inventories of new and used vehicles are in short supply. This has been beneficial for dealerships in two ways: an increase in car prices because consumers are willing to pay sticker price or above for new and used cars.

While the positive side of the demand for vehicles vs the supply has had its rewards for dealers, what’s going to happen when inventory levels return to normal? How will dealership management tactics change as a result of the upheaval created by the pandemic and supply chain issues?

Should you buy buy buy?

While consumers can expect to find more vehicles at dealerships as the microchip shortage improves, what’s “normal” for dealerships is going to change, and car dealership management tactics have to evolve. 

What are some ways that can help dealers navigate the “new normal” now and into the future? To combat the lack of inventory on the lot and maintain cash flow, dealership management should consider the following strategies:

• Capitalize on fixed operations — service and parts — with valuable offers that could help increase dealer margins
• Shift the focus to local inventory acquisition; purchasing pre-owned vehicles can help with inventory and drive used vehicle sales at higher prices 
• Consider offering at-home used car services 
• Invest in digital marketing with an online showroom

Numerous dealers are making predictions about a transition in the way they sell vehicles — a more modern approach that focuses on making car buying more like other retail experiences for their customers with the help of advances in technology. And, with proper planning, it can be win-win for management, staff, and shoppers.

Changing with the market

Many of the changes in the auto industry resulting from the pandemic are here to stay, at least for the near future. This is especially true about continued shortages in inventory. Focusing on digitization as well as providing a more personalized shopping experience for customers are important marketing tools even after things get back to some sense of normalcy.

By planning now, dealerships will be better prepared to deal with the transitions. GYL CPAs and Advisors, a car dealership accounting firm, provides a wide variety of accounting services for automobile dealerships, from protecting your assets to helping you identify opportunities for growth.