What Dealers Can Do in a Diminishing Passenger Car Market
General Motors announced Monday that it planned to idle five car factories in North America and cut roughly 14,000 jobs in a bid to trim costs.
Spurred by low gasoline prices, Americans are snapping up trucks and sport-utility vehicles, which generate fat profits for manufacturers. The American economy remains strong, with unemployment low and interest rates modest.
All over the automotive news sources have been reports about declining passenger car sales while trucks and SUVs are selling like hotcakes.
Just two decades ago, cars outsold larger vehicles by a two-to-one margin. Today, it’s almost exactly the opposite. Ford has announced they will stop selling most of their passenger car in North America within the next few years, and General Motors appears to be very close to following suit.
By all appearances, it looks like car buyers have disappeared. However, the car customers aren’t gone – they’ve just changed! A bit of a background: an aversion to trucks and SUVs wasn’t due to their size. It was because they were rudimentary, more expensive to own, and less efficient on fuel. Now that trucks and SUVs have become more luxurious, less expensive comparatively, and much more fuel efficient, it makes sense that customers gravitate towards them.
Why It Matters- and what to do
There very well could be a blip on the sales radar when car sales are shut off. Yet, it doesn’t mean that the retail automotive industry will suffer one iota. Here’s what you should focus on:
1. Gross profit in SUV and truck sales are higher on average. While fewer units might be RDR’d, the overall profit will be the same, likely higher.
2. There will be a spike in used passenger car sales when the tap is turned off. Keep pre-owned inventory well-stocked beforehand.
3. Maintenance and repairs for larger vehicles is a massive opportunity. Trucks and SUVs typically require more servicing throughout their lifecycle, especially those with AWD or 4WD, generating higher service department revenue.
Car repairs and maintenance is a prospective market. People who love their cars will want to keep them running well, and your dealership can capitalize on it with parts and service campaigns - and increased focus on customer service training to keep skills fresh and current.
While you already know these things, it’s good to have them reiterated. In addition to these items, make sure your sales team is well-trained on your whole range of vehicles. And as always, keep customer satisfaction at the top of the priorities list.