After COVID crisis drives car sales off a cliff in April, Northern Nevada auto dealers look to turn a corner
RENO, Nev. — Ryan Dolan, CEO of Dolan Auto Group, says the month like it’s cursed.
“April,” laments Dolan, sighing heavily, “is the worst month we’ve had on my watch. It literally cut our business — it cut everything — in half.”
Pausing, he gives a more accurate snapshot: “Actually, I would say it cut our business by 60-75% across the board.”
Dolan Auto Group, a family-owned company with five car dealerships in Reno and one in neighboring Fernley, is not alone.
Nationwide, the coronavirus pandemic drove car sales off a cliff starting in March, and they continued to free-fall in April.
The auto industry ran into major roadblocks as the COVID crisis unfolded. State-issued stay-at-home orders kept possible buyers out of showrooms and closed numerous sales departments across the U.S. What’s more, widespread unemployment spikes stopped countless would-be buyers in their tracks due to the looming uncertainty.
Consequently, U.S. auto sales hit a 30-year low in April, according to auto research firm Edmunds. In all, the industry sold an estimated 633,000 new vehicles, a 53% drop compared to 2019, Edmunds says.
“We’re definitely hit by it,” said Jeff Campagni, general manager of Carson City Toyota, which saw a 15% sales drop in Q1 and a 20% dip in April. “Although we were hit by it, we were grateful it wasn’t horrible.
“Now, we’re just trying to get back on track.”
With Gov. Steve Sisolak’s phased business plan slowly allowing car dealers to reopen showrooms and reignite test drives, Northern Nevada companies that spoke with the NNBW are hoping to put their Q1 and April figures in their rear-view.
Helping matters, dealers are promoting big incentives for customers, including 0% loans for as long as seven years and deferred payments for as long as 120 days. And customers are paying attention. In April, no-interest loans accounted for a whopping 26% of new car sales, according to Edmunds.
Not to mention, after being shut down for nearly two months, automakers have gradually restarted production to bolster the supply chain. In April, carmakers produced just 4,840 vehicles in North America, down from 1.4 million a year prior, according to Automotive News.
“Things are picking up,” Campagni said. “I see people coming out and taking advantage of the 0% loans and deferred payments and jumping on those new cars right now. People still want to buy vehicles; people are still buying vehicles.”
Dolan agreed. However, he’s keeping in mind the state’s safety guideline that showroom areas must not exceed 50% capacity.
“I’m not trying to rush everybody down here, but it’s a really good time to buy a car on the economic side of things,” Dolan said. “I think there’s a little bit of a bounce and some pent-up urgency to come out and buy and get back to some normalcy in life. I hope that maintains and sustains throughout the summer.”
DRIVE TO DIGITAL
Though dealers are seeing less activity on their lots, many are seeing an uptick in online sales and digital financing as well as touch-less curbside pickups and deliveries, according to Campagni. And he sees the sharp turn to online sales as an opportunity not only for car dealers, but also the customers.
“People want that,” said Campagni, pointing out that about 85% of Carson City Toyota’s sales since the pandemic took hold have been through online sales. “Before, we only sold a few online each month, and now you’re seeing it pick up because people are trusting it. I think it’s going to be a whole new way of doing business, and I actually think it’s going to be here to stay.”
Tom Rackley, president of Rackley Auto Group in Reno and Rackley Chrysler Dodge Jeep Ram in Winnemucca, feels the industry’s push toward doing business digitally was long overdue.
“Why people hate going into the showroom,” Rackley explained, “is because you have a salesman, then you have a manager, then you have another manager, and then you need the guy that does the paperwork at the end.
“It’s like going to the dentist, you just don’t want to do it.”
This, Rackley said, is why establishing a more streamlined sales process will be embraced by car-buyers in Northern Nevada and beyond. So much so, Rackley, like Campagni, feels the customer-friendly pivot to online sales will be permanent.
“Even when we have a vaccine — post-pandemic — customers are going to expect dealers to operate a certain way,” he added. “And the industry needs to adapt to that.”
Rackley, however, noted that since his Reno dealership reopened in early May after shutting down completely in mid-March, they’ve seen an uptick in customers struggle to get financing. During their first week and a half back open, Rackley said roughly 30% of would-be buyers could not obtain a loan because they were unemployed.
“We can’t just make a bank buy an auto deal,” he said. “The banks are tightening up because you’ve got so many people unemployed. Banks are asking for fresh paystubs because they want to make sure they’re employed.
“An auto dealer can offer every incentive on the planet to help buy a vehicle but it doesn’t do any good if they can’t afford it.”
THE ROAD AHEAD
Nevertheless, the auto industry is slowly trending upward. In fact, the week ending May 10 was the sixth consecutive week of improving vehicle sales at dealerships, according to J.D. Power, a marketing data and analytics company.
Sales expectations for the year, though, have been drastically lowered due to COVID-19. J.D. Power projects U.S. auto sales this year of about 12.6 million to 14.5 million vehicles, down from an estimated 16.8 million prior to the pandemic. Notably, car sales could be an important barometer for the rest of the U.S. economic recovery, as the auto industry represents about 3% of GDP, according to the Center for Automotive Research.
Though cautiously optimistic, Dolan, for one, said the company’s forecast for the year has been drastically altered amid the uncertainty surrounding the virus and the unknown of how the state’s reopening plan progresses.
“I don’t think we’re going to be anywhere near our profits of last year,” Dolan said. “But, I think we can all stay viable and keep people working and make a profit if you run your business right. “If I can keep my people working and we can keep our customers happy and I break even, I’d be ecstatic right now. That would be a definite win.”
“Nevada is facing record high unemployment and the sheer numbers are difficult to comprehend,” Gov. Sisolak said in a statement Friday.