Car sales spike during pandemic

Jeff McConville: Corwin Automotive has one-fourth of its average inventory.

John Widiger: Youngblood Auto online sales are up 50% since before the pandemic.

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As stay-at-home orders lift, local car dealerships are experiencing a boom in business.

Several dealership officials say they’ve logged record months in May and June, following a drop in sales amid government-mandated shutdowns in April. Some point to low financing promoted by the automakers, while others say online activity contributed to the sales.

But the buzz might not last much longer. With manufacturing plants closed in recent months across the country, officials say production is quickly falling behind.

“With plants closed and just now being opened, we’re about 60 days behind getting our inventory in,” said Drew Anna, general manager of Napleton Autowerks/Missouri Inc. “I have cars spread out to make it look like we have inventory.”

Last year, Napleton Autowerks moved to a roughly $10 million dealership off U.S Highway 65 and East Division Street. Anna said the Volkswagen, Porsche and Mitsubishi dealership sold 112 units in June, up about 20% year over year. He declined to disclose revenue.

Jeff McConville, operating partner of Corwin Automotive of Springfield, said May and June were record months for the dealership group. Corwin Automotive operates Chrysler, Dodge, Jeep, Ram and Fiat fleets on West Sunshine Street and a Ford lineup on South Glenstone Avenue.

He said the group sold an all-time high 600 new and used cars in May and again in June, compared with the typical 500 monthly units sold.

He said it’s partly because of sales promoted by car makers across the country in response to the financial impact of COVID-19. For instance, Ford was offering 0% financing for 72 months on select models, according to its website at press time.

“The manufacturers put out a lot of great incentives to move inventory that was on the lots during May and June,” said McConville. “But those incentives are disappearing because supply is low.”

At Youngblood Auto Group, Managing Partner John Widiger said May and June sales also rebounded for the longtime dealership group following a “tough” month in April when typical sales were cut in half. The dealership furloughed 95 employees in April.

“The second May hit, and stay-at-home orders were lifted, it exploded,” Widiger said, adding online activity has contributed to the boost.

Youngblood Auto has returned 80 employees, working at its dealerships in Springfield, Ozark and Nixa, and laid off 15 workers.

Low supply
The two Corwin dealership lots in Springfield collectively carry 400-500 cars at a time, McConville said, but that volume was down to roughly 150 cars across both lots at press time.

“I’m carrying about one-fourth of what I’d have in stock normally,” he said. “Inventory is going to be short at least for another month or two until the manufacturers can get back to normal build and delivery times.”

By the end of March, 93% of all U.S. auto production came to a halt, according to research by the Alliance for Automotive Innovation. The industry association pointed to Ford, General Motors, Fiat Chrysler and Volkswagen plants closing nationwide.

“We have demand, and sales are there. It’s just the low, low inventories,” McConville said. “And when inventories get low, deals start drying up.”

He said the shortage of new car sales also leads to a lower supply of used cars.

“It takes a new car business to generate a used car business,” said McConville.

Nationwide, used vehicle sales rose 17% in June above pre-pandemic forecasts, according to research firm J.D. Power. Local dealers cited special financing offers from manufacturers and lower interest rates. As of July 1, auto loan interest rates were roughly 4.33% for 48 and 60 months on a new car and 4.73% for 36 months on a used car, according to personal finance website Bankrate.com. That’s down from roughly 4.7% and 5.3%, respectively, a year ago.

Anna said competition is now heightened for used cars at local dealerships.

“They’re hard to buy right now,” Anna said. “Everyone is in the same position and has their hands raised at auctions to get those cars.”

Online shopping
Much like in other forms of retail, the e-commerce platform has gained traction for the car-buying world over the last few months.

More than 90% of General Motors Co.’s dealers use its “Shop Click Drive” e-commerce program, according to a first quarter earnings report. Roughly 750 dealers signed up for the program in the first few months of the pandemic.

“Internet activity has been off the chain,” said Widiger, describing a 50% increase in online sales.

Youngblood Auto began implementing online purchase options in December in response to the growing online retailer Carvana Co., he said. Youngblood Auto has since created a virtual buying experience with 72-hour test drive options.

Arizona-based Carvana (NYSE: CVNA), a company that sells used cars online and stores them in vending machine facilities, also experienced a nearly 40% dip in April sales from the previous year. But it’s since rebounded, according to reporting by The Wall Street Journal.

Widiger said many customers still want to come to the dealership in person to test drive the car and finalize the sale, but many aspects of the deal can be completed online.

“I wanted to be the guy in town that was on the cutting edge of delivering a car without coming to the store,” said Widiger. “When COVID-19 hit, we were pretty prepared for it.”

Anna said Napleton Autowerks also launched an online purchase option in May for the Mitsubishi and Porsche lines, which he said has provided a slight boost to sales.

He said the dealership has delivered cars to buyers in Kansas City and across state lines to Oklahoma, Arkansas and Ohio over recent months.

At Corwin Auto, McConville said the number of units sold online has doubled in the last two months.

“We can do everything online now. We can pick up their cars for service at their house and we have online scheduling tools, too,” he said. “(COVID-19) has pushed us forward and faster than a lot of dealers were ready to go.”