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Strategies for Your Dealership During the Chip Shortage

May 27, 2021

Approximately 76% of used car shoppers will purchase a different vehicle than the one they initially came prepared to buy. To maximize the potential for a sale during the chip shortage, try these sales strategies for used cars.

by Amanda Knowlton & Charlie Bass
 

Dealers around the nation are feeling the effects of the chip shortage, dealing with limited inventory on their lots. Despite these challenges, advanced dealers have the tools and skills they need to quickly pivot during the market disruption and maintain profit while riding through the economic downturn. The widespread vehicle shortage is not just felt in one department at the dealership, but across the entire business. If dealers have any hope of emerging successful, every department must do their part to adjust to the given environment.

 

Dealing with new car sales during the chip shortage

With the current chip shortage, [domestic] franchise dealers are having difficulties accessing new inventory on their lots in the wake of the 2020 manufacturer shutdowns. Unfortunately, the effects are still being felt as the ripples spill over into this fiscal year.

This is what dealers can do to manage new car sales during the chip shortage.

  • Maintain a positive customer experience. Switching to a consultative sales approach is needed to provide options for customers. Salespeople need to offer alternatives to fit consumer needs. The shift to online purchasing forever changed consumer expectations, and in the light of the chip shortage, dealers need to alter their sales strategy to remain relevant. Find out which features are necessities versus the ones they are willing to compromise on. (Is color really a deal-breaker? Is a sunroof acceptable over a convertible? Does the vehicle just need to be roomy and family-friendly?)
  • Proper CRM integration. This technical requirement is more crucial now than ever. With delays in shipments, following up on desired vehicles is an essential task and could be the difference between a sale or a lost opportunity. Dealers will want to ensure the next steps are transparent and provide information on anticipated delivery.

 

Strategies for used car sales during the chip shortage

The chip shortage isn’t just affecting new car sales, it’s also impacting used car sales. The positive takeaway for used car sales is that there are alternative options available within the variable departments: used, lease, and additional revenue.

Approximately 76% of used car shoppers will purchase a different vehicle than the one they initially came prepared to buy. To maximize the potential for a sale during the chip shortage, try these sales strategies for used cars.

  • Take a consultative sales approach with used car customers. Focus on questions like “what interested you in the vehicle?” Or “are there certain must-have features for your next vehicle?” Even, “which features do you like most about that model?”
  • Know your inventory. This includes knowing both what is listed and what is not listed. Dealerships within a group have an advantage here, as their used car inventory is easier to trade amongst stores. Have a working knowledge of which used vehicles are comparable to the customer’s desired purchase and provide options if their exact vehicle is not available. Keep an eye on traded/refurbished vehicles as well. Dealers are all facing the same issue with the chip shortage, so being the first to reach out to a customer once their desired vehicle is available will ensure you earn the customer’s business.
  • Know your lease inventory. As potential vehicles arise due to lease terminations, dealers have an excellent opportunity to secure the leaser’s repeat business, and/or provide a used option for a different customer within your database. Leased turned pre-owned vehicles have an advantage compared to other used vehicles, as they are single-owner and maintained at the dealership of purchase. You will also be able to better forecast variable income upon deeper inspection of lease renewals/terminations. Knowing that we have had success with Lease Renewal Pull-Ahead Programs [if it’s not available what do I do—preemptively reach out and ask what the customer may be interested in, knowing it will take a while for the vehicle ot come available. Positive customer service…]

 

Managing fleet, wholesale, and rental vehicles during the chip shortage

There are dealerships that have additional businesses within the dealership, such as insurance and rental car franchises. This is a great opportunity to pivot sales strategies and increase revenue to assist the whole business. When done correctly, proactively reaching out to customers to offer cheaper insurance rates can establish a positive customer experience and increase the likelihood for repeat business in the future. In addition to sales, the nation is experiencing a rental car shortage. However many dealerships are not able to capitalize on tourist income as they are too far from airports and train stations. Offering options like pick up can increase revenue for the dealership as well as open you to new markets.

Here are details on this section of automotive sales during the chip shortage.

  • Wholesale during the chip shortage: When inventory becomes high, wholesale vehicles are usually unloaded for a breakeven profit. Instead, consider slowing the sales process and looking for opportunities to increase profit with individual buyers. This could be a valuable stream of profit while other avenues, such as new car sales, are slow.

Rental vehicles: With wholesale cars also becoming more scarce, rental companies are shifting to auction purchases to keep their inventory stocked. This is a unique shift that has not been seen before in the automotive industry. Once clients, rental car companies are now vying for vehicles as competitors.

  • Fleet/Work vehicles during the chip shortage: Vehicles that were previously used as fleet cars may provide an option for used car sales in the midst of the chip shortage, rather than selling to rental companies.

 

Handling Fixed Operations during the chip shortage

Most dealers focus on variable operations revenue when looking to manage the vehicle shortage across America. Pivoting to a focus on Fixed Operations can ensure dealers not turning a profit within sales maintain steady income to cover overhead during leaner months.

  • Keep cars maintained for a return to travel. With states reopening, mask mandates being lifted, and summer upon us, consumers will turn to the open road to welcome back pre-COVID life. Even manufacturers are advertising toward messaging of “find adventure on the open road.” This means we’ll see an uptick in maintenance and increased RO’s coming through all service lanes across the country.
  • Take a positive customer service approach to managing your phone lines. Consumers do not hold dealership loyalty in as high of a regard as time/availability and experience. We are a now culture, and service departments that are difficult to reach or unavailable for appointments several weeks out, are at risk of losing reoccurring business from that customer.
  • Make the fixed ops experience a good one. Many dealerships do not focus on fixed operation calls and experience, as they assume it’s steady income no matter what the customer may experience during the scheduling process. Phone Skills Training and call monitoring is crucial to ensure all missed opportunities are captured before the customer can schedule with a competitive dealership. Providing coaching to improve the customer’s experience will also help to ensure initial and repeat business.

 

Take a proactive approach during the chip shortage

The chip shortage isn’t going to be gone within mere months. Dealers may need to buckle down and get creative. Taking a proactive approach to this problem could ensure future resilience for dealers and might be the key to survival. Many dealers may find they even need to pre-order cars to meet demand. Regardless, the dealers that are equipped with excellent customer service and the right call monitoring tool will be the ones that weather the storm.

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