Here’s how San Diego auto dealers are selling cars now that they’ve emerged from pandemic lockdown
After an unprecedented crash, sales are rebounding but long-term questions remain
You couldn’t tell because of the mask but Dave Miller had a smile on his face Tuesday morning.
“We had a great sales weekend,” said Miller, the general manager for John Hine Mazda in Mission Valley.
After more than two months in which sales of cars and trucks crashed because of stay-at-home orders brought on by COVID-19, customers are coming back to showrooms across San Diego County.
Miller’s dealership sold 42 vehicles over the three-day Memorial Day weekend — 26 new and 16 used.
“We got our salespeople back just in the nick of time,” Miller said, referring to roughly 50 employees from all segments of the dealership who were laid off but are now coming back to work.
Nearly every dealership in the county kept their service departments open throughout the pandemic but greatly reduced the hours and conditions surrounding the sale of vehicles.
Dealers emphasized online purchases and deliveries while encouraging potential buyers to make appointments instead of arriving at the showroom unannounced. Some places, such as El Cajon Ford, completely closed their sales departments during the depths of the downturn.
The lifting of some restrictions has given dealers a much-needed boost, even if they have not completely exhaled.
“There’s a sense of uncertainty because you don’t know what the big picture is,” Damian Campos, general sales manager at Toyota of Escondido said at the start of last weekend. “But the feeling that I get, and I was just talking to one of my managers, and he said there’s nothing but good vibes out there.”
The more upbeat tone in San Diego has been mirrored across the state. All 160 dealers who responded to a survey released Wednesday by the California New Car Dealers Association said their showrooms are open and 94 percent reported increased traffic.
“There’s a lot of pent-up business,” said Campos, who estimated his dealership has brought back about 90 of the roughly 100 employees it laid off or furloughed. “Customers are tired of being locked up indoors, they’ve been wanting to buy a car for months.”
But the survey also highlighted the financial impact of the shutdown. Since mid-March, 54.5 percent of the dealers reported decreases in sales of between 30 to 60 percent. Another 25 percent said sales had fallen between 60 and 80 percent.
“Those are Great Recession numbers,” said Brian Maas, the president of the new car dealers group. “And it took 2 1/2 years for that drop to occur and this happened in eight weeks.”
What you’ll see now
One of the first things prospective car buyers encounter amid the “new normal” is attention to social distancing guidelines and cleanliness.
The Toyota dealership in Escondido, for example, has taken a pair of workers from its detailing shop and converted them into full-time cleaners who constantly circulate around the facility, wiping down tables, desks, door handles and computers.
The dealership has also been disinfected twice.
“We want to make sure everyone is comfortable and safe coming back to work,” Campos said. “It’s not just Toyota or auto dealers, I think it’s every business. Employees are worried. They don’t want to get sick. I don’t want to get sick. The only time the mask is off my face is if I’m in my office by myself.”
All sales staff wear masks and gloves, and customers are required to wear face coverings upon entering the showroom.
“If you don’t have one, we’ll provide one for you,” Campos said.
Miller said Hine Mazda is taking the temperatures of their employees each day, in addition to other measures such as dedicating an employee to constantly wipe down high-touch areas throughout the dealership.
“It’s like the Golden Gate Bridge,” Miller said. “When you’re done at one end, you have to do it all over again.”
The pandemic has also changed the way many dealers handle test-drives.
Maas said under COVID-19 protocols laid out from Gov. Gavin Newsom’s office, sales personnel have to ride in the backseat, opposite the driver. But some dealers have simply allowed customers to go on test-drives by themselves, provided they fill out the required paperwork.
“That has actually helped us work with people on the floor because when salesmen go on a demo drive that takes quite a lot of time away from them helping another customer,” Miller said. “Customers seem to like it a lot. These customers nowadays have done their research online before they even get here.”
Before the pandemic, new vehicle sales in California were projected to reach 1.8 million this year. But those numbers have gone out the window.
Maas guessed sales could fall as low as 1 million, approaching figures last seen in 2009 when his organization counted 1.04 million new vehicle registrations during the depths of the recession.
“Obviously, everybody hopes for a V-shaped recovery and sales come back quickly,” Maas said. But there are so many variables to account for, including fears that a second wave of the virus could come in the fall and winter.
Another 2.4 million Americans in May filed for unemployment benefits, bringing the overall number to nearly 40 million. California’s unemployment rate rose to a record high 15.5 percent in April.
“People who are unemployed generally don’t buy cars,” Maas said, “so the question is, what kind of impact will that have on our business going forward? There’s certainly some pent-up demand. You’ve had people sheltering at home and as these orders start to lift, they go back to the market and that’s pretty encouraging but we’ll have to wait and see over the next few weeks how much sales really do come back.”
The rental car business has been decimated by the downturn since airline travel has nosedived. Just before Memorial Day, Hertz filed for bankruptcy protection. The 102-year-old company operates a fleet of more than 500,000 vehicles, raising questions about what a liquidation could mean for the used-car market.
“This is a generational challenge for our dealers, their employees and, frankly, our customers, too,” Maas said. “But car dealers are eternal optimists.”
Going forward
Long-term, some auto industry analysts predict the effects of the pandemic will hasten the transition to more online sales.
“As the older buyers move out of the market who are not as likely to use the Internet (to purchase a car), you find that the Millennials, the Generation Xers and Generation Yers are much more attuned to using the Internet for all these things,” said George Peterson, president of consulting firm AutoPacific, based in North Tustin.
In addition, thanks to improvements in technology and manufacturing, cars and trucks are more reliable and stay on the road longer than they used to.
“It’s really pretty safe to actually buy a car unseen on the Internet,” Peterson said.
A switch to more online sales may also lead to a rethinking of brick and mortar dealerships. A physical space of 10,000 square feet or more — and, crucially, the high cost associated with leasing such a space — could become a thing of the past.
“You have a lot of legacy dealerships out there that won’t make themselves smaller immediately,” Peterson said. “But what they might be doing is having more brands inside one showroom.”
In 2006, a Lexus dealership in Newport Beach spent an estimated $75 million to construct an elaborate facility that included a showroom the size of a football field.
“It’s clear this is going to move everybody to the Internet so it’s going to be critically important that the interfaces and the websites become extremely easy to use — kind of like Amazon or something like that,” Peterson said. “And also that the financing process be developed to where you can do it online, if you can do the signatures by DocuSign or remotely.
“It’ll take a while for some of these companies to do it but I know they’re all moving in that direction.”
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