Usually, the phrase is zero to 60 in the auto industry. But this past March, automobile driving went from 60 to almost zero. With stay-at-home orders in place, many businesses temporarily closed, schools closed, and many working remotely or unemployed, driving slowed significantly. So much so that several insurance companies offered a percentage of reimbursement on auto premiums for two-months. So how did the shutdown affect the local auto industry? GBS Business Insider talked with several auto groups to get an update.
Fine Tuning Operations and Online Business Were Key
Alert, quick thinking and good response times are keys to defensive driving, whether behind the wheel of a car or a business. Immediate action and fine-tuned adjustments were the common thread to dealerships navigating success this past year. Based on our representative sampling, the good news is that valley auto sales were either flat, slightly off or slightly increased compared to 2019.
“Typically, March is our biggest month,” said Jason Cammisa, campus director for indiGO Auto Group’s Desert European Motorcars Campus. “Through early March, we were on pace, but then the last two weeks dropped off. We went into a completely different mode on how to operate the business. We changed some of our processes, and we reallocated some of our cash reserves to be in a bit of a strength position since we were unsure of what would happen. And we kept managing the business the best we could.”
“There were some successful car dealers last year and some unsuccessful ones. I think the reason we did better was probably due in a big part to the way we moved and pivoted as a group and the decisions we made,” said Cammisa. “A huge part of the success is also the people we employee.”
Scott Simmers, general manager, Palm Springs Motors – Ford, Lincoln and Mazda, and Fiesta Ford, echoed, “We adjusted on the fly – like I think a lot of people did. We had to start changing our business model.”
Service Continued Strong for Some
After the “two weeks to flatten the curve” expired, more regulations hit, and in-person auto sales were mostly closed, except by appointment until May. Dealerships across the country banded together and lobbied in Washington D.C. to be considered an essential business. Meanwhile, auto maintenance continued to be recognized as an essential service.
Fortuitously, in January 2020, Palm Springs Motors and Fiesta Ford had just launched a mobile service featuring two fully equipped service vans that can handle many auto service and repair needs at a customer’s home. The dealership had no idea how helpful that timing would prove to be in keeping the service side of profits going. “We had this in place, but we put it into hyperspeed once COVID hit,” said Simmers. “Our vans are hooked into the dealership computers. We can do everything right there in the driveway – from oil changes and cabin filters, even brakes if they aren’t into the rotors. It’s also very helpful to take care of minor recall issues,” he added. “It’s very convenient for the customer, and they don’t have to step foot in the dealership.”
IndiGO Auto Group, which owns 21 luxury dealerships, 10 of which are in the Coachella Valley, also worked hard to keep the service flow going. “With COVID came a whole new string of processes to keep customers and employees safe. We sanitized the cars when they arrived, and then after the cars were worked on, we resanitized them and sealed them with a sticker emblem where you couldn’t open the door without breaking the seal, so there was confidence that it was clean going back into the customer’s possession,” said Cammisa.
Dan Jessup, general manager, Jessup Auto Plaza, reported his dealerships noted a slowdown in service. “People weren’t driving and weren’t going through tires and getting the wear and tear. Service has been softer and has not seen the same strength that the new and used car sales have.”
Internet Sales Led the Way
Most dealerships have been steadily becoming more Internet-driven, but the recent pandemic drove that traffic way up. “Immediately, we saw next to no traffic physically, but our internet traffic was up 250 percent,” said Jessup. “Internet purchasing is becoming more prevalent, and the pandemic probably accelerated it.”
“After the first couple of weeks of shock and awe, everyone was at home, and one of the things they found they could buy was a car. Instead of going on a trip, they bought a car,” said Jessup.
In addition to at-home service calls, dealerships also got creative in delivering vehicles to customers. “We took it one step further,” said Simmers. “If a customer didn’t want to visit the showroom, we’d finalize everything at their home. We’d use the proper social distancing and deliver their vehicle to their home.”
Manufacturer Financing Also Provided Some Incentives
In addition to more time at home to research auto models, auto manufacturers offered some irresistible loan incentives that also helped boost 2020 sales. Simmers, who’s been in the auto business for 38 years, said he’s never seen anything like the zero percent loans for 84 months that Ford introduced this past spring.
Tighter Inventory Control Led to Efficiency
“The good that came out of COVID, if you can find some kind of good, was that we were able to scale our operation a little bit,” said Simmers. “The manufacturers didn’t produce cars for about 60 days during COVID (initially) because they had their own production issues. Our inventories got to all-time low levels.” Before COVID, he said his dealership has run heavy inventory for the last 10 years. “This hit the correction button for us that we didn’t need to stock as much inventory as we had been, and it made us more efficient.”
Commenting on how the year ended, Simmers noted, “Normally it takes us 120 days to sell down our previous year models. Because of manufacturer incentives and the pent-up demand, we had the cleanest inventory change over in the history of Palm Springs Motors and Fiesta Ford.”
Used Car Sales Increased
All three auto groups said they experienced a rise in used car sales. “New car production numbers were down and that created a high-priced used car market,” said Cammisa. This also boosted the value of customer trade-ins.
How They Did – 2020 Sales Compared to 2019
“2020 was slightly down year over year,” said Jessup, “but by no more than 5 to 7 percent. Considering we were shut down for a solid 60 days, we consider that a strong win or a great year. That means our third and fourth quarters were the two back-to-back strongest quarters we have seen since the early to mid-2000s.”
Usually, flat growth would not be particularly exciting, but for 2020, it was a reason to celebrate for Palm Springs Motors and Fiesta Ford. “There were probably six to eight weeks where we weren’t fully operational. The positive thing was, once we came out of that, we made up that lost ground. We finished the year about the same as we did in 2019 – almost exactly the same, even though we did it in a shorter time,” said Simmers.
Recapping the year, Cammisa said, “As we came through June, sales and profitability increased, and we no longer had any employees on furlough. (indiGO Auto Group opted not to file for PPP and established their own COVID-relief employee program.) It’s been a ride, but we did end the year with a small percentage increase.”
“The desert real estate market also positively affected the luxury auto market. “There are a lot of people who have been caught here in the states and stayed. We noticed a lot more people in the summer more than usual. With an unbelievable booming real estate market, there are people who have continued to relocate here. They don’t want to be in a big city, and we’re seeing a lot of new clients because of that. COVID has not negatively affected the client flow into our dealerships,” said Cammisa.
Pandemic Expansion
While this expansion did not happen in the valley, it’s still worth noting that indiGO Auto Group even added a dealership to their illustrious group during the pandemic. In December 2020, they rounded out their luxury brands with a Ferrari dealership in Redwood City in the Silicon Valley. “It was the fastest purchase of a new Ferrari dealership in the country – within 60 days,” said Cammisa. “That was really the only (luxury) brand we didn’t have in our group, and it just came up.” In 2021, the company will also open a new Ferrari dealership in St. Louis, which is currently under construction. “We are in growth mode right now,” stated Cammisa.
On the Horizon
With an impressive 2020 turn around and sales steady through February, projections for 2021 remain strong. “Having a full 12 months of production ramped up, interest rates staying low, and the market staying strong, along with new electric products, it fits with my forecast that 2021 will be a strong year,” said Jessup.
Among the new electric vehicles generating excitement include the Mustang Mach-E SUV, currently available at Palm Springs Motors and Fiesta Ford; and at Jessup Auto Plaza, the buzz is about the all-electric Cadillac Lyriq, unveiled at the Super Bowl, the launch of the GMC Hummer electric truck, and later in 2021, the dealership is expecting delivery of the Chevrolet Bolt EV and SUV.
For more information, visit: www.indigoautogroup.com, www.fiestaford.com, www.jessupautoplaza.com, www.palmspringsmotors.com.
