Resilient dealers aid nation's recovery

COVID-19 has changed our world forever. Containing the coronavirus and producing a vaccine will not immediately lift the economy, nor will ending quarantines and travel restrictions automatically return demand to previous levels. However, the American spirit of dogged resilience and fortitude, in spite of the odds, is at play in many sectors of the economy.

The automotive industry is at the forefront of an economic recovery that is well underway. Vehicle sales have risen throughout the year, with third-quarter volume 36 percent higher than that of the second quarter. These results, in the face of the pandemic, far exceed all projections and are testimony to the resilience of American business and specifically the American auto dealer.

As reported in Automotive News ("Dealers are fortified for 2nd wave of COVID," Nov. 23), Rhett Ricart, chairman of the National Automobile Dealers Association, commented that "Dealers have been resilient through this unpredictability, and dealers will continue to adapt to whatever is thrown at them." He continued, "Dealers are not only essential, but we've been critical."

Among automakers that are still reporting sales, results are improving by the month. Advertising dollars have almost reached levels similar to those in 2019. August automotive ad spend was the industry's best mark since the pandemic began. Along with many diverse sectors of the economy, which are moving forward at a steady pace, the auto industry is doing its part. In late October, The Wall Street Journal reported a "faster than expected bounce back for the car industry."

Wards Intelligence found that vehicle production in North America has almost returned to pre-virus levels — a remarkable and noteworthy recovery. When the industry entered an unprecedented shutdown in the spring because of the pandemic, production of cars stopped completely. But sales continued, draining the inventory at dealerships. By exercising creativity and effective management, many resourceful dealers experienced record profits in these most challenging of times.

The surge in consumer confidence demonstrated over the third quarter is a sign that Americans are feeling better about the general economic outlook even as the pandemic drags on. The Conference Board's Consumer Confidence Index increased to 101.8 in September, up from 86.3 in August. Notwithstanding that the index has leveled off in recent weeks, likely because of uncertainty around last month's elections, the increase demonstrated throughout the year presents a reason for optimism. Adobe Analytics predicts $189 billion in online sales this holiday season, representing two years' worth of growth in e-commerce. Consumer spending hit a record on Thanksgiving, providing a positive start to the holiday season.

The Consumer Confidence Index sat at 132.6 in February, before the coronavirus started spreading widely in the U.S., plunging to nearly 86 in both April and May. The benchmark then jumped in June before sliding once again. September produced the highest level since April. Lynn Franco, senior director of economic indicators at the Conference Board, says that consumer confidence increased sharply in September due to a more favorable view of current business and labor market conditions, coupled with renewed optimism about the short-term outlook.

Other economic indicators, including the Conference Board's Employment Trends Index, Leading Economic Index, Help Wanted OnLine index and Measure of CEO Confidence, are all up. The percentage of consumers indicating they feel business conditions are good right now rose to 18 percent.

Consumers were also more hopeful about the short-term future: 37 percent believe that business conditions will improve in the next six months, while about 16 percent think things will get worse. About a third of consumers believe the labor market is going to get better in the next six months. Unemployment has fallen since peaking at nearly 15 percent in April to 6.9 percent, as reported by the Bureau of Labor Statistics on Nov. 6.

In a recent internal poll of auto dealers, more than 60 percent stated that business is better today than it was pre-COVID. In this same poll, 70 percent affirmed they believe that 2021 sales will exceed those of 2020. The automotive industry is playing an integral part in the economic recovery across the country. Once again, U.S. automobile dealers have demonstrated their unique business talent to manage and overcome a daunting obstacle.

The car business is an aggregation of multiple businesses, with varied processes, under one roof. Managing a dealership requires expertise in both retail and wholesale sales, retail and wholesale parts, inventory management, the ability to manage customers in both sales and service environments and the ability to produce a financial statement consolidating everything. Dealers must also manage a labor-intensive business on a large, expensive physical plant, while negotiating between a franchiser and a comprehensive set of laws and regulations influencing every aspect of the business. With all of this, talent is primarily trained internally. Harvard still doesn't offer a degree in car dealership operations.

There is nothing quite like the car business and nothing like the U.S. automobile dealer.