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Did the Pandemic Cause Car Sales to Increase?

driving a car

Many industries suffered the impact of the pandemic, but the automotive and mobility industries were particularly hit hard. Consumers were forced to postpone their car-buying plans, with transportation restricted and traveling banned. But since the economy moved back again in the second half of 2020, automakers and dealers might’ve already recovered.

But how, exactly? When the state of the emergency in the U.S. began, automakers scrambled to offer aggressive financing, cashback, and lease incentives to attract buyers despite the situation. Many dealers also did what they’ve never done before, which was to conduct their operations online. Before the pandemic, they often resisted technology, sticking to the tradition which is to transact face-to-face.

Now, let’s see if these changes allowed car dealers and the automotive industry, in general, to bounce back.

Car Sales and Servicing

In McKinsey’s latest data, the purchase intent for cars was still 14% below pre-pandemic levels. This was during July 2020. On the brighter side, that purchase intent percentage was 4% higher than that of May. But the data differed depending on geographical location.

McKinsey surveyed consumers from the U.S., U.K., Germany, France, Italy, Japan, and China. Their biweekly findings were as follows:

  • New and used car buying intent for the next 12 months recovered to 10%.
  • Overall purchase intent increased, especially among higher-income households.
  • All regions except China decided to spend less on their vehicles than before the pandemic, but planned spent has improved across all geographies.
  • Consumers from the U.S., U.K., are Japan weren’t as focused on Electronic Vehicles (EV), Plug-in Hybrid Electronic Vehicles (PHEV), and Advanced Driver-assistance Systems (ADAS). But Chinese consumers are the opposite.
  • Consumers buying “independently on discounts” have grown.
  • Aftermarket services improved. More car-owners had additional work done on their autos.

buying a car

Based on those findings, it’s safe to assume that car sales and servicing have bounced back pretty well. Even if the majority of people worked from home, they continued to show intent for buying cars. This could be attributed to the air travel restrictions. Since it’s riskier to be on flights, more people considered land travel, driving their own cars instead of using public transport.

Car Buying Habits During the Pandemic

Before the pandemic, car dealers prided themselves in tradition and hard-selling tactics. You’d often find car salespeople rambling about, especially in the passenger seat during test drive sessions. But due to social distancing protocols, car dealers finally gave in and adopted digital technology in their practices.

Some have already been conducting remote operations before the pandemic, but many followed suit only when the health protocols began. You can now find a number of dealers online, transact with them with very little human interaction, and face a sales associate only if you want to. No one works on commission either, relieving the pressure from both buyers and sellers.

Naturally, the health protocols changed the norms in test drive sessions too. Buyers may now test drive their units alone, with the salespeople and other staff staying 6 feet apart from them. This impressed car buyers, who, according to a survey by Cox Automotive, craved time with their new vehicles without a pushy salesperson.

Another positive change brought by online car-buying was the reduced likelihood of discrimination. Believe it or not, white people were given more favorable financing offers than non-whites. But thanks to online car-buying, Black Auto Enthusiasts were able to share a list of dealerships owned by black people. These allowed non-whites, females, and other discriminated groups to find a good dealer with the assurance that they’d be treated well.

Car Financing During the Pandemic

Car loan franchise companies adapted well to the pandemic. They helped consumers with buying and leasing processes online and offered home delivery options to get rid of the need to visit a showroom. Many companies also continued their generous incentive offers. In addition, several automakers have extended their military and first responder discount programs to healthcare workers. One of them was Ford, which offered a $500 discount to eligible medical professionals and their families.

Will People Keep Buying New Cars After COVID-19?

The general advice is, if you can afford it, you have a secure job, and a stable income, then nothing should stop you from buying a car other than your safety. Since you’d rather not risk your health, you better ensure that your car dealer follows all the health protocols. And of course, you yourself should also comply with the protocols.

With regard to the old ways of car dealers, it is likely that many of them will return to tradition when things go back to normal. But the economic impact of COVID-19 may push the auto industry to reinvent itself. As such, it’s possible that we can expect online car dealership operations to continue after the pandemic. If that becomes the case, then more young people, who prefer their shopping done online, may keep buying new cars.

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