Things are rarely all good or all bad. Let’s take a look at how things are shaping up this year.
As I write this article in early March, some influences in our world are improving, others hopefully will improve, and the impact of others remains unknown.
Not the best environment to find ourselves in but we have been here before and are confident we can successfully navigate whatever is thrown our way.
After 26 long months, the disruptive influences of COVID 19, Delta and Omicron seem to be headed in the right direction, at least from a restriction’s standpoint. This should have a positive impact on consumer sentiment in the short and long term.
We should however anticipate a wide range of reactions as Canadians begin their journey to a new normal. Even with health and safety mandates being relaxed, many Canadians will have comfort zone issues that as dealers we must be prepared to accommodate in our dealerships.
Consumers are facing financial pressures as everyday essential items, for example food and fuel, take an increasing position on monthly household budget cash flow.
Not quite so clear is when the end of the chip shortage and related supply chain disruption issues will be resolved. We are all anticipating a stair step return of vehicle and parts inventories.
At best we can expect an inconsistent recovery in the short term. After more than a year of severe shortages for most brands, customers seem to have accepted a build to order approach and seem to be prepared to accept, at least in the short term, that delivery delays are normal.
From our perspective, if all brands are in the same boat, the competitive playing field remains level. Should that change with some brands and models coming earlier to market than others, there is a potential to tip the playing field and thus alter the competitive landscape in the short term. Our goal as dealers is to deliver on the orders we have in our pipeline and not lose them to other brands in the short term.
The financial dynamic from the combination of high inflation and upward trending interest rates could affect consumers’ ability to complete the orders already in our order bank.
Consumers are facing financial pressures as everyday essential items, for example food and fuel, take an increasing position on monthly household budget cash flow. Add to that the impact of higher interest rates on new vehicle loans and renewing residential mortgages and you get a formula for increased financial pressure on consumer household budgets. This could affect vehicle affordability, impact consumer behaviour and vehicle demand.
These past 24 months have created an environment for major uncertainties. The good news is that we have learned to quickly pivot to ensure our customers are well served and our staff are encouraged, well trained and informed. The result has been one of the best profit years on record for most dealers.
The current war in Ukraine is playing havoc with world economics. Oil and other sanctions imposed on Russia are having an effect all over the world. Financial pressures are being felt here in Canada.
High gas prices at the pumps might be the catalyst for more fuel-efficient vehicles for some and will likely escalate the shift towards electrified vehicles for others. With many of our order banks full of committed buyers, we must ensure that we stay in constant contact with them.
Not all brands will emerge at the same pace and at the same time. This has the potential to create an uneven playing field. We are at risk of losing some of our customers in the order bank unless we are fully transparent and engage them with regular contact.
Adding to the uncertainty is the noise around changes to the auto retail model itself. Many brands are experimenting in markets around the world. These seem to be focused on the new vehicle portion of the business with various new vehicle inventory resale models emerging.
It’s very early days but online direct to consumer is the catalyst that could reshape our traditional business model going forward. This has many implications for all of us. Many of us are optimistic to be part of the changing model and others of us are not so sure. It’s very early days but the global momentum will likely spread quickly.
The good news is that we have learned to quickly pivot to ensure our customers are well served and our staff are encouraged, well trained and informed.
With the pandemic hopefully behind us, we are still faced with headwinds in 2022. We are, however, armed with the knowledge that we know how to quickly pivot and collectively have the belief we can manage our way through whatever the economy throws at us.
This gives us tremendous optimism even in these uncertain times. After 26 long months this is not the time to fall asleep and let down our guards. We are still required to navigate through unknown challenges. The difference is we now have the confidence to do so.
