Industry Insights & Trends

The Impact of the Covid-19 Pandemic on Online Automotive Sales in the United States


Three insights regarding the impact of the Covid-19 pandemic on online automotive sales in the United States include Covid-19 driving auto sales online and U.S. online car sellers spending big sums on digital commerce platforms designed to execute the auto sale. Detailed information is below.

Covid-19 Drives Auto Sales Online

  • There has been a shift in the desire to purchase and sell vehicles online due to the Covid-19 pandemic. Online vehicle sales represent just 1% of the approximately $840 billion spent by Americans every year on 40 million used cars. However, after several U.S. states went into COVID-19 lockdowns beginning in March, socially-distant online sales have become popular. According to the CEO of Carvana, Ernie Garcia, there has been a shift in the desire to buy and sell vehicles online.
  • Auto dealers in the U.S. have been slow to adopt online sales, but the coronavirus pandemic is changing that. The pandemic, says Mike Jackson, chairman, and CEO of AutoNation, America’s largest auto retailer, has accelerated online sales for the automotive industry, “which has been reluctant to adopt such processes due to the fear of disrupting their profitable showroom operations.”
  • A survey conducted by CarGurus Inc CARG.O in April 2020 found that 61% of those shopping for cars would consider buying online, compared to 32% before the pandemic. Consumers are being allowed to choose which and how much of the car buying process they want to conduct online, including scheduling a test drive or applying for financing.
  • The director of Group 1′s retail strategy, Paige Goodwin, has seen a spike in the number of people using online car buying tools and the steps they follow go further in the process. “Online-generated sales, or sales that start online, tripled in April 2020 to 7.3%” for the company.
  • Smaller dealers are also shifting to online sales. For example, Mike Bowsher, who owns Carl Black Automotive Group, with four dealerships with General Motors brands in Florida, Georgia, and Tennessee, says that around 80% of his Group’s sales are now starting online. The sales have propelled the company into the digital space, and sales are strong.
  • Large dealers like Sonic Automotive are also embracing online sales, doing online virtual sales and a no-contact touchless delivery for both sales and in-service customers. The company gives customers the freedom to conduct most of the sales process online if they want.
  • Although many car makers perceived online sales as a threat to their showrooms in the past, the coronavirus is changing that. Automakers are enhancing current programs for dealers or rolling out new online sales tools, as they see online sales as a chance to salvage sales during the coronavirus pandemic.
  • For example, Fiat Chrysler launched a new online sales program in April 2020 that lets customers finish the sales process online and delivers the vehicle that has been purchased to customers’ homes without them visiting a dealership. Mark Stewart, chief operating officer of North America for Fiat Chrysler, expected the car maker to have 50% of its 2,650 U.S. dealers using the tool in April 2020, increasing sales significantly.
  • Other car makers like Porsche have increased incentives for dealers to conduct digital sales. Also, General Motors has increased the presence on its online sales program referred to as “Shop, Click, Drive,” which was launched in 2013.
  • In March 2020, Cox Automotive’s Autotrader also launched a new program called “Dealer Home Services.” The program provides virtual tours, test drives at home, and touchless vehicle delivery, and the company reports that over 7,000 dealers have signed up for the program.
  • The increasing popularity of online purchase companies such as Vroom and Carvana show growth in the online auto retail market. For example, Carvana “sold 52,427 vehicles in the first quarter of 2020, up 43% year over year. The company’s revenue hit $1.10 billion in the quarter, up 45% year over year.”

Carvana's Quarterly Retail Unit Sales

Large Amounts Spent on Digital Automotive Sales Platforms

  • According to Reuters, the coronavirus pandemic has led to U.S. online car sellers spending huge sums on digital commerce platforms created to handle auto sales, to take advantage of the online automotive sales. Only those with big budgets to spend are succeeding due to this trend, and new entrants into the market will continue to suffer.
  • The big three auto e-commerce players in the U.S. will grow significantly, according to Toby Russell, joint CEO of Shift.
  • Reuters says that Carvana has spent $2 billion to roll out its digital network since 2013, including paying for technology to evaluate trade-in vehicles and store and deliver cars to buyers’ homes.
  • The other player, Vroom, has spent approximately $1 billion on its online platform so far, according to CEO Paul Hennesy.
  • The number one used car retail chain, CarMax Inc. (KMX), has spent “more than $300 million rolling out a digital platform to accompany its 200 U.S. stores.” According to the chief marketing officer of CarMax, Jim Lyski, the huge investments in rolling out online sales by automotive companies will limit digital competition, as the largest players are the only ones able to afford to build the online selling capacity.
  • CNBC says that automakers and dealers are investing millions of dollars in new digital sales tools driven by consumers demanding more online and personalized services.

Coronavirus to Impact Future Consumer Online Purchasing Behavior

  • As per the president of Group 1 Automotive’s U.S. operations, Daryl Kenningham, the coronavirus “will have a long-lasting impact on the auto industry and consumer purchasing behavior, particularly online dealer processes.” Consumers have been comfortable with the online buying of other items but were not so comfortable with buying vehicles online until the coronavirus pandemic hit.
  • According to Consumer Reports, although no one knows what the post-pandemic future will exactly look like, based on its conversations with trade groups and dealers, consumers can expect to mostly buy cars like they do with many other items using their smartphones and tablets.
  • Jason Courter, chairperson of the American International Automobile Dealers Association and chief operating officer at Honda Auto Center in Seattle, foresees a situation where there will be a lot of online car buying after the pandemic eases off.
  • Courter says that current state regulations and current franchise rules make it tricky for car selling companies to make contactless sales, sometimes due to in-person signature requirements. However, he states that dealers are already discussing how the sales landscape will change due to current coronavirus-induced turmoil.
  • Contactless or almost contactless transactions are likely to increase. The consumer would peruse the online catalog, pick a vehicle, select additional options, get approved for financing, or buy the car outright. The vehicle could then be delivered to the consumer’s house, either by two drivers and a follow car or on a flatbed truck. Depending on local laws, the paperwork could be signed electronically over the internet or outside in the driveway.
  • Consumers interested in a “contactless” transaction will need to do online and telephone research to see which dealers are offering online sales and home delivery options. Shoppers may also need to feel comfortable buying a car without test-driving multiple models or doing an at-home test drive that some dealerships offer.
  • However, dealerships will remain an essential piece of online retail for car makers, according to experts. BCG projects that “online transactions extending to billing and payment could account for about 5% to 7% of new-vehicles sales in the U.S. by 2025 and as much as 33% by 2035.
  • The shift to online sales “presents an opportunity for automakers and dealers to gather more data and develop a better understanding of consumer behaviors. That data can be used to break down silos both within auto manufacturing companies and between brands and dealers. By tracking the customer’s journey through the purchasing process, automakers will learn what types of incentives and sales promotions have the most effect, which options and trim levels have the largest uptake, and at what point consumers are most likely to bounce to rival brands. Such data can be used to fine-tune everything from what gets produced on the factory floor to what arrives in the showroom.”
Glenn is the Lead Operations Research Analyst at Simple Manifestation with experience in research, statistical data analysis and interview techniques. A holder of degree in Economics. A true specialist in quantitative and qualitative research.

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