Automotive Industry Q1 Recap: Supply Chain Issues Persist
In this installment of the fusionZONE blog, we’re covering the state of the automotive industry following Q1 of 2022.
What’s improved, and what’s stayed the same? Where are the areas of opportunity, and what’s the outlook for Q2 and beyond?
We’ll cover all of these questions and more, so stay with us as we recap Q1 and what to expect in the months ahead.
The State of the Automotive Industry
As we covered in our 2022 Automotive Industry Outlook, the auto industry is in a state of flux as suppliers and manufacturers continue to struggle with ongoing automotive supply chain issues.
In particular, the high cost of materials and components and low supply has forced many companies to raise prices on their vehicles. This has led to increased inflation throughout the automotive market, as consumers are increasingly unwilling to pay more for cars.
New vehicle sales in Q1 2022 came in at 3.3 million, according to Kelley Blue Book, down 15.7% year over year from 3.9 million in the first quarter of 2021.
However, Q1’s EV sales of 173,561 set a record for any quarter, representing an increase of 76% from Q1 2021.
Additionally, the industry is seeing some interesting used car market trends as consumers shift away from new cars in favor of cheaper alternatives. We’ll take a closer look at all of these issues in this article.
With the rise in vehicle prices, many consumers are turning to the used car market for cheaper alternatives. In fact, the used car market has seen a surge in popularity in recent months as buyers look to save money on their next purchase.
These used car trends are likely to continue as more and more people become aware of the benefits of buying used cars. Additionally, the increased availability of online resources has made it easier than ever to find quality used cars.
While it’s likely that automotive supply chain issues will continue at least in the short term, there are steps you can take to mitigate the effects on your business.
Opportunities: Overlooked Dealership Profit Centers
Despite the challenges faced in Q1 of 2022, there are some positive signs for the automotive industry.
One is that dealers are starting to focus on profit centers that have been overlooked in recent years. These include things like vehicle buybacks, service centers and parts departments.
By diversifying their revenue streams, dealers are becoming less reliant on new car sales and more resistant to market fluctuations.
Another positive sign is that automotive manufacturers are starting to focus more on electric vehicles. This is a good move for two reasons. First, it helps them meet stricter emissions standards that are being put in place worldwide. Second, electric vehicles are becoming more popular with consumers, so there’s a growing market for them when new vehicle supply improves.
While online car buying is still in its early stages, it’s growing at a rapid pace. More and more people are choosing to buy a car online. This is another area of opportunity for traditional car dealerships to improve and capture the attention of modern and next-generation car buyers.
Another area of opportunity for car dealerships is vehicle buybacks.
Dealers can buy back quality used cars or lease returns to add to their pre-owned inventory. Vehicle buybacks from lease returns or new or used car shoppers can help dealers replenish their inventory during this time of new vehicle scarcity on many lots.
Finally, service centers and parts departments are another potential source of revenue for car dealerships.
As motorists hold onto their vehicles for longer due to the higher prices of new and used cars, they’ll require routine maintenance and repairs. Dealerships that have a strong service center and parts department will be able to capitalize on this trend.
A well-run service center can generate repeat business and word-of-mouth marketing for the dealership. Dealerships that focus on their service center and parts department can create a competitive advantage over those that don’t.
See our 10 tips to increase service department profitability for ways to boost this area of your business!
Despite these positive trends and areas of opportunity, the automotive industry is still facing some significant challenges going into Q2.
Supply chain issues continue to plague the industry, as parts shortages and production delays are becoming more common. Additionally, inflationary pressures are making it difficult for consumers to purchase new vehicles, as the cost of living continues to rise.
In the short term, these challenges are likely to persist, but the automotive industry is poised for a rebound in the long term.
The supply chain constraints will not resolve overnight, so expect more of the same heading into Q2 of 2022.
Some automotive industry experts don’t expect the automotive supply chains to return to some form of normalcy until sometime in 2023. But, of course, that all depends on things we cannot know or control, such as returns to overseas pandemic lockdowns and geopolitical events that could affect that outlook.
It is still too early to tell what the future holds for the automotive industry. However, dealerships will need to continue to be creative in order to adapt and thrive in this ever-changing landscape.
Digital Marketing Resources and Solutions for Q2 and Beyond
Are you looking for online marketing tools and resources to stay ahead of the competition in Q2 and beyond? The fusionZONE team has you covered, from SEO and Google Ads and social media, reputation management and lead conversion tools like our FastRing callback widget.
See our high-performing and competitively priced digital marketing packages for an all-in-one approach to enhancing your online marketing efforts.
You can reach out to the fusionZONE team if you’d like assistance creating a digital marketing playbook to help you thrive in Q2 and beyond!
Also, consider these budget-friendly digital marketing ideas to get you started on increasing leads and sales through the rest of 2022.