Dealership Training Economy Industry Trends

Preparing for a Different Kind of Sales Season

It’s officially fall which brings football, cooler temperatures, and 2022 vehicle models. We can predict that at least two of those things are happening this year. New vehicle production challenges continue to linger. Chip shortages, supply chain disruptions and factory shutdowns still plague our need for new inventory.

According to Cox Automotive, only 1.2 million new vehicles were ready to roll onto lots as of July 19th, compared with the average inventory of 3 million. In August, dealers reported just under 1 million new cars on lots, 72 percent lower than August 2019. The major manufacturers have projected production reductions well into the fall, making the new inventory forecast even gloomier.


Mid-Year Economic Indicators Guide 2022 Planning

The midway point for 2021 is in the rearview mirror and many dealership owners and managers are knee-deep in planning for 2022. Now is the perfect time for a quick review of the mid-year economic indicators. While new model retail sales are trending up and used vehicle prices are hitting record highs, there are some broader market trends which should be considered.

Supply chain issues impact sales forecast

According to NADA, new light-vehicle sales are expected to reach 15.5 million units for 2021, representing a 7.2 percent year-over-year increase.  Fitch Ratings expects vehicle sales to return to 2019 levels in 2022/2023. However, IHS Markit and Wards Intelligence do not expect the U.S. to see 17 million light-vehicle registrations annually until 2025. This market skepticism is fueled by supply chain issues and a persistent semiconductor shortage. General Motors, Fiat Chrysler and Ford have all felt the impact on production, and analysts believe the semiconductor chip shortage will reduce new vehicle production by 1.28 million.

While dealers have experienced the vehicle shortages first hand, one bright spot is the strong trend toward online sales which were bolstered during the 2020 shutdown. Consumers increasingly became more comfortable completing more of the vehicle purchase process online. This has allowed dealers to stay in the game even with the persistent production issues as the online sales model is perfect for a vehicle order rather than immediate delivery.


The Current Climate for Regulatory Compliance

The retail automotive market has found itself in an interesting situation. On one hand, retail sales are rebounding nicely, with strong price pressure coupled with continued low interest rates. On the other hand, all signs are pointing to an increased environment for regulatory scrutiny from an  hyper-focused Consumer Finance Protection Bureau (CFPB), Federal Trade Commission (FTC), and various local officials.

New leadership within the CFPB has signaled through their rulemaking agenda that automotive lending practices will garner increased scrutiny. New legislative bodies within state and local governments in many areas have followed suit to respond to discriminatory lending practices and perceived predatory consumer behavior.

Couple this renewed regulatory interest and sales environment, with a host of new fraud and cybersecurity schemes that can trip up any company, no matter how big, and the situation gets even more convoluted.