AUTOBYTEL INDUSTRY SURVEY..SIGNIFICANT FINDINGS…
Industry Study Indicates Dealers Deeply Divided on Key Industry Issues, Including Future of Fuel-Efficient Vehicles and Large SUVs
Autobytel Inc., a leading automotive Internet marketing services company, recently released the findings of a survey of hundreds of dealers nationwide, revealing their perceptions of the current new and used vehicle markets, what they’re re-focusing on to survive, and their predictions for the future. The study, conducted by Survey.com, sheds light on the state of the auto industry from the trenches: the insight of those who confront the sales climate and auto consumer realities every day.
The findings clearly indicate the serious impact the recession economy is having on dealers. Fifty-six percent of dealers report that new vehicle sales this year have decreased from 2007. And while dealers across the board indicate feeling some impact from the down market, domestic dealers report significantly more serious sales declines. Seventy-three percent of domestic dealers report sales are down (vs. 48 percent of import dealers), with 26 percent of domestic retailers clocking serious year-over-year declines of 25 percent or more, as opposed to 11 percent of import dealers.
Top Survival Tactics: Focus on Lead Conversion and Internet Marketing
Auto dealers are a historically tough, resilient group of retailers, and a key focus of the survey was to explore the strategies they’re adopting to weather the storm. The findings were overwhelmingly clear: dealers are refocusing on follow-up and lead conversion processes, as well as increasing concentration on Internet marketing, as the top two tactics to survive the downturn. Seventy-seven percent of dealers are refocusing on follow-up processes/lead conversion, while 69 percent report increasing their focus on Internet marketing, making it a larger part of their overall marketing spend. Additionally, half of dealers surveyed indicate an increased focus on follow-up/lead conversion processes will be the most important thing to combat the economic climate, trumping, for example, either an increased focus on the used vehicle (17 percent) or service departments (13 percent). On the whole, 91 percent of dealers are either upping–or standing firm–on their Internet marketing spend, despite tighter budgets.
Interestingly, the brands surveyed reporting the strongest sales gains in 2008 – Honda, Hyundai and Nissan – also ranked as the top three brands with the highest percentage of dealers increasing their Internet marketing spend. Overall, import dealers are more likely to increase their focus on both follow-up and Internet marketing than domestics, while domestics are more likely to concentrate on the used department as a strategy to remain profitable in the year ahead.
Sales Trends by Brand: Fuel-Efficient Inventory Drives Gains
According to the sales numbers reported by dealers of individual brands, the success stories of 2008 are shaping up to be Honda, Nissan and Hyundai. Roughly half of Honda and Hyundai dealers, and 40 percent of Nissan dealers, report sales are up, in an overall industry running at 15-year lows. The traditional opposition between Toyota and GM is not a major storyline according to their dealers: 72 percent of GM dealers report sales declines this year, as do 65 percent of Toyota dealers. In fact, more GM dealers report sales gains (15 percent) than Toyota dealers do (11 percent). Of course, Toyota retailers were left holding a sizable inventory of large trucks and SUVs, and too few hybrids, this year, which may be why more Toyota dealers blamed ‘their current inventory mix’ for their sales declines, than any other group of dealers.
With gas prices hitting record highs in 2008, it’s no surprise that roughly nine out of ten dealers reported an increase in sales of smaller, fuel-efficient vehicles, with 54 percent reporting spikes of 20 percent or more – revealing how a fuel-efficient inventory mix is proving a dealer lifeline. For example, 73 percent of those successful dealers reporting overall sales up 10 percent or more, indicated they’d seen a ‘significant’ leap in small vehicle sales–versus 56 percent of dealers overall who report ‘significant increases.’ And top sales performers Nissan, Honda and Hyundai reported the most impressive gains in small, fuel-efficient vehicle sales (up 20 percent or more) — at 79, 62, and 51 percent of dealers, respectively. With a seismic industry shift toward fuel efficiency underway, those brands prepared with strong gas-sipping line-ups have been relatively insulated from the wider industry declines.
With current sales gains being driven by fuel-efficient offerings, and an industry currently replacing its inventory mix with better mileage vehicles, there could arguably be some light at the end of the sales tunnel. But, according to the survey, dealers are guardedly optimistic about the timeframe of a turnaround. A majority (52 percent) predict that a meaningful sales recovery will not take place until at least the second half of 2009 — or beyond.
Dealers Divided on Hot-Button Industry Issues
When asked which factor is most responsible for declining sales, dealers were split on blaming high gas prices (38 percent) or the credit crunch (37 percent), with 10 percent accusing their current inventory mix, offering too few fuel-efficient vehicles. Interestingly, a significant number of dealers wrote in blaming the media itself, arguing the incessant reporting on the down market was tangibly affecting consumer optimism and sales.
Dealers were also deeply divided on whether the shift towards fuel-efficiency was permanent, or whether big SUVs and lower gas prices would inevitably stage a comeback. Forty-nine percent of dealers (the largest bloc) believe that high gas prices and the shift to fuel-efficient vehicles is just part of a cycle – and that gas prices will retreat and larger vehicles will make a comeback — while 46 percent believe just the opposite. Dealers known for fuel-efficiency are significantly more likely to ascribe to the permanent, fuel-efficient shift theory: nearly 65 percent of Honda dealers fell into that category versus 22 percent of Chevy dealers, while 67 percent of Hummer dealers believe high gas prices and the focus on small cars is just part of a fluctuating cycle.
Dealers were also notably divided on whether fuel efficiency represents the #1 buying consideration for car shoppers today: 55 percent agreed, but 45 percent disagreed. Import brand dealers were significantly more likely to believe miles-per-gallon is now the top buying consideration (58 percent of dealers) versus their domestic counterparts (42 percent).
The Survey.com study, commissioned by Autobytel, was conducted from August 25, 2008 through September 8, 2008 and involved 200 nationally representative automotive dealers. A phone survey was conducted to collect the data for this study.
(Source: Autobytel, 10/7/08)