Among many other anomalies, the year 2020 gave us a peculiar story about dealership valuations.
The COVID-19 pandemic sent a chill through the automotive industry in spring 2020. Assembly plants shut down and dealerships closed. Millions of people were out of work. Doom and gloom dominated the news. Whether you were locked down or had to go to work, almost every day was characterized by the phrase “these uncertain times.”
Then the unexpected happened. Just as quickly as auto sales had come to a halt, they began to recover. People still wanted or needed to buy vehicles. This renewed demand put pressure on dealers for new contactless sales processes.
Most dealers rose to the occasion, moving quickly into online sales, even delivering vehicles directly to customers’ homes and businesses. The automotive retailing industry had begun adapting to the “new normal.”
Part of this “new normal” for dealers was a decrease in fixed operations, as car owners who were in quarantine didn’t need their vehicles serviced. Fortunately, this decrease was offset by higher retail margins created by strong demand (aided by stimulus payments) and low supply of new inventory.
This trajectory continued through 2020. According to NADA, 2020 new-car sales reached 14.46 million units, only a 9% decline from 2019. 2021 began with the launch of COVID vaccinations in the US, bringing feelings of relief and freedom to the American population.
People are now beginning to feel comfortable venturing out to many places they haven’t been to for over a year – including new car dealerships and their service departments. We’re entering the post pandemic era?