How key suppliers are adapting to tackle the remarketing industry’s challenges.
The disruption to the automotive remarketing industry since 2020 has been significant, to say the least, with the pandemic wreaking havoc on the flow of the many integrated aspects of the sector that dealers are involved with.
To better understand the challenges that dealerships are faced with, Canadian auto dealer reached out to several suppliers
in the remarketing field to
share their insights, and to offer potential solutions.
The process challenge
Some dealerships in Canada are looking for a full service provider to help them with the different aspects of remarketing, from inspection to vehicle pricing, all the way to the transportation of vehicles, according to Maria Soklis, President of Cox Automotive Canada & Brazil.
“That’s one of the challenges that we’re hearing about,” said Soklis. “Another one is digitizing the whole consumer buying experience—offering the customer ease of doing business through a more frictionless and transparent process, while at the same time, trying to keep the process tight and efficient for the dealer.”
Dealers are—and often with good intention— over-complicating the process by trying to mirror the in-store buying experience.
What the company has noticed, according to Soklis, is that dealers are—and often with good intention—over-complicating the process by trying to mirror the in-store buying experience, when digitizing the process should be about enhancing the in-store experience.
Solutions for dealers
Soklis said Cox Automotive has invested heavily in digitizing its own processes to support dealers. The company transitioned to a simulcast-only model and are using a digital-first approach, starting with its online dealer-to-dealer auction platform Muvit.
The company is investing in a number of resources to evolve this process to better meet the needs of dealers who are looking to source and get pricing for vehicles. Soklis said they are also looking to help dealers better integrate that full service by ensuring the platforms are integrating better with their own brands and partner brands, “to bring ease to the way they do business with us.”
“It’s a soft spot for dealers, and the reason is, you’ve got a bunch of different companies that are all competing in this space,” said Soklis. “And sometimes what happens is, in your quest to compete and remain relevant and to win business, you overlook what the real needs are in the market.”
She said it is important that providers continue to evolve the industry and the aspects of that automotive ecosystem that are going to bring ease of doing business to dealers, regardless of whether they are a franchise or independent. It also needs to tie-in with offering more transparency and a frictionless experience for the consumer.
“So if there is a problem with one part of that process, it can very quickly become a problem throughout,” said Soklis.
She said the company has also invested significantly in a digital-first, intuitive upstream platform with two OEM partners out in Vancouver, B.C., which will officially launch later this year. It will be within their remarketing product of suites. (Vancouver is also where Cox Automotive is building a facility to facilitate the process through the two OEM partners.)
“We haven’t played in that true upstream space here in Canada before, so we’re really evolving our business, because we’re seeing a need in the market to do that, to continue to support this entire digitization, both from tier one to a tier three perspective,” said Soklis.
If we have learned anything from the pandemic, it is this: at the drop of a dime, we can hit unprecedented times. The automotive retail business needs to be diversified, and dealers need to be fluid enough to change the way they do business when needed.
As Soklis puts it: “It’s a complex business that needs to be simplified to evolve and better meet customer expectations.”
The supply and demand challenge
On the other end of the spectrum is the other big, global issue: semiconductor shortages. Production delays. Supply constraints. High consumer demand. Export pressure. This in a nutshell sums up the current automotive and retailer situation in Canada.
On the remarketing front, it is a two-part challenge: the first is positive in that consumers received a lot of stimulus money from the federal government, allowing them to make big ticket purchases. But demand is also high, making it both a blessing and a curse for many dealerships.
“You see a very high volume of vehicles exported in the market, which then kind of leads to more supply constraint. So we’re kind of in this loop, and that’s really the key narrative on the overall global remarketing environment right now.”
— Trevor Henderson, Chief Operating Officer of Adesa Canada
The second part involves a connecting group of challenges with ripple-effect impacts—one of them being that demand, combined with some supply constraint, is pushing prices up.
The issue, according to Trevor Henderson, Chief Operating Officer of Adesa Canada, is that this leads to a higher demand from export buyers who purchase vehicles in Canada and sell them to the United States, where prices are even higher.
“You see a very high volume of vehicles exported in the market, which then kind of leads to more supply constraint,” said Henderson. “So we’re kind of in this loop, and that’s really the key narrative on the overall global remarketing environment right now.”
Henderson expects things to level off at some point, and when it does, there will be more new vehicle supply—but also a little less demand for used vehicles, and prices will also eventually stabilize.
The upside is good news for dealers eager to sell new vehicles and anxious about the lack of new inventory. Right now, however, month-over-month, the price of used vehicles continues to increase, which is the broader supply and demand picture.
So for now, dealers can take advantage of the dramatic shift in the off lease space, and the ability to search for more inventory or specific products in various cities through online auctions to try and meet the increase in consumer demand.
Solutions for dealers
As for dealers who are reluctant to let go of their cargo, thinking they may be able to sell it to a consumer through tools like TradeRev (a division of Adesa), Henderson suggests considering all the options.
“We now give dealers the ability to keep the vehicle on their lot, offer it retail to a consumer, but also put it into wholesale auction events,” said Henderson. “And TradeRev makes that really simple: capture the vehicle digitally, launch it into an online auction, and if the dealer gets the right price at the wholesale auction, then they let it go.”
If it does not sell on TradeRev, they can always flip it into the next Adesa auction and remarket the unit without it having to leave the dealership lot.
Henderson said Adesa also offers reconditioning services that makes these vehicles frontline ready, so retailers can focus on other tasks. And the company added new condition report capabilities this year for both the American and Canadian markets that includes high-definition vehicle undercarriage photos on its reports.
The Adesa Simulcast+ online auction platform has also evolved with more events, and more flexibility for buyers and sellers due to how the events are set up and scheduled, which means dealers can browse for more options, more frequently.
“These are a few of the benefits and opportunities for dealers that they may not be aware of, but that I think can make things more efficient,” said Henderson.
The export challenge
There are moments during the pandemic when the U.S. market exchange rate is favourable for the exportation of vehicles, when considering price and demand. That of course puts pressure on Canadian vehicles, bringing U.S. buyers and sending vehicles flowing towards our southern neighbour.
“Dealers, both from a wholesale and a retail perspective, just can’t get enough vehicles on the lot,” said TradeX CEO Ryan Davidson. “Frankly in Canada, the situation is that a lot of these vehicles are actually being exported to markets where they’re worth more.”
He said Canadian dealers have a further disadvantage in accessing their supplies because in the Canadian market, based on the current currency environment, is attractive for other markets that have stronger currencies. So while the global supply chain is affecting them, Davidson said they also have the lion’s share of vehicles being exported out of the country.
According to Luciano Butera, Executive Vice President and Chief Operating Officer at TradeX, the service is meant to help assist dealers with export market expertise and help them bring import vehicles into Canada.
It does not help that 57 per cent of dealerships here do not believe that Canadian dealers are getting their fair share of global vehicle allocation, according to a survey released in May 2021 by the Canadian Automobile Dealers Association (CADA). Nearly 91 per cent of respondents said they were concerned about new vehicle supply in the near future, and 87 per cent believe it will take at least six months before they see an increase in supply.
Even rental fleets are in need of inventory.
According to DesRosiers Automotive Consultants (DAC), the fleet market plays a crucial role for both the new and used vehicle sectors in Canada; it accounts for one in five light vehicle purchases in the country. And on the used vehicle side, fleet disposal typically represents a steady supply of one-to-four year-old products into the market, “supplying the used car lots of dealers across the country,” said DAC.
Davidson said he is aware of one rental company buying every used or new vehicle they can get their hands on to replace their rental fleets, simply because automakers were not able to satisfy the allocations due to supply chain issues.
“This is affecting dealers. This is affecting rental companies. This is affecting leasing companies,” said Davidson. “It’s pretty widespread.”
Solutions for dealers
On the upside, Canadian dealers will be able to source vehicles from the U.S. through the TradeX platform by the fourth quarter of the year.
And thanks to a new partnership with Canadian Black Book, the company will be able to show inventory volumes in the “tens of thousands of vehicles” monthly to Canadian dealers. The partnership means that dealers will be able to find vehicles that they can buy and source at or below Canadian market value.
“So we will give them access to a massive supply of used car inventory that can be delivered right to their door, similar to what the current dealers have access to,” said Davidson. “From our perspective and what we can offer to help, this would be a big value proposition to dealers on the TradeX platform.”
The company is also launching a managed services division.
According to Luciano Butera, Executive Vice President and Chief Operating Officer at TradeX, the service is meant to help assist dealers with export market expertise and help them bring import vehicles into Canada. He said the service will be available to assist dealers in accessing and participating in global auto markets across the board.
“It’s an excellent tool for dealers to kind of mediate the import-export market, and get a better understanding without having to invest a lot into their own infrastructure,” said Butera.
As more and more Canadians become vaccinated against the COVID-19 virus, and provincial and federal restrictions are eased, life will slowly return to some hybrid of pre- and post-pandemic normal. Until then, suppliers are working to help ease some of the challenges for dealers in the various areas of remarketing.
