Interview: Selling cars during the pandemic-driven chip shortage
The global chip shortage has slashed vehicle inventories and left dealers with few cars to sell. Ryan Dolan is the CEO of Dolan Auto Group in Northern Nevada. He spoke with our business reporter, Kaleb Roedel, about how the pandemic has changed the way people prefer to buy their cars and why millennials are buying more than any age group.
Kaleb Roedel: Alright, Ryan, we're about two years into the pandemic. What are the biggest changes the pandemic has had on the way car dealers now operate?
Ryan Dolan: Well, put it this way, at our Toyota store, pre-pandemic, we would have about over 1,000 cars in the pipeline, which consists of cars on our lot on the ground, cars that would be in freight on their way here, and cars that have been allocated to us and are in process of being built. Today, that number is under, well under, probably 200, so the cars we're selling, the numbers seem a little bit steady.
It is definitely dropping over the last six months because I think the Dominos finally caught up to us, and really hurt the amount of cars that were available, but what happens is, the consumer, if you're driving by a lot, and you see lots that are barren, a lot of those are orders. So, as the cars come in, they're not hitting our lots, they're just getting ready, and people come in and are picking up their orders, so it's a double-edged sword. As we start to ramp up, the inventory starts to build up, we have so many orders in place, that you won't see that it's going to have a lag effect for another six months to a year.
Roedel: A lot of car dealers are now boosting their online sales; that seems to be more of a trend. Do you think the pandemic has accelerated the shift to car shopping online, instead of coming into a dealer and walking the lots?
Dolan: It naturally had to do that. It accelerated where we thought this market was going to go probably by five to 10 years quicker than we thought, due to the fact that people were stuck at home. And the human nature, people aren't real patient people, so they decided to get online and start online shopping, not only for cars, but for everything, as you well know. So, yes, I think it accelerated it, but at the same time, as we hopefully come out of this, I think they're going to want to come back.
I think there's always going to be that online shopping, I think people feel safe in their own home shopping for what they want, especially something as big as a vehicle; however, I think the human nature aspect is going to come back and I think people are going to want to come test-drive it, smell it, feel it, you know, see the car they want. I don't understand how you buy a car just off a picture, but some people can. I've always thought the cars would be kind of different because I feel like you're spending that type of money, you're gonna want to go see it, touch it, make sure it drives the way you want it to drive, but I may be wrong.
Roedel: How much has the pandemic shifted revenue, and just the amount of sales a car dealer can generate, compared to before the pandemic?
Dolan: Well, the sales part has been flipped. We've had to spend a lot of money in the used car arena, and we have had to purchase a lot of used cars because obviously with less new cars, people still need vehicles to drive, so it's just been a switch. The volumes have not dipped as much as people may think because they see less cars. Have they dipped? Yes, the pure numbers of cars sold have dipped, there's no doubt about that across the nation, but with the used car market and segment really robust, it’s not as bad as you think. So, it's just been one of those shifts and how you do business.
I think people are keeping their cars a little bit longer now because they don't have as many options on the new market, so you generate some revenue in the service departments, parts departments, people keeping their cars longer, paying more for maintenance, maybe doing that big job that they wanted to fix their car, where in the past, they might have just traded in and got a new car. But, with the lack of new inventory, they're kind of stuck, so they either purchase a 'new used' car—I don't want to call it a 'new used' car, but a 'new used car to them,' or they fix their cars. So, they're tending to keep their cars longer.
Roedel: In 2020, millennials bought more new cars than any age group. It was like 32% of all new car sales. What do you attribute to that?
Dolan: I drove something a lot different in my 20s than I did in my 30s with children, so, we all, we all can [relate] to that. So, as a millennial generation, or any generation for that matter, grows, their lifestyle, their needs, their wants change, and that means that they come back to the marketplace and purchase that vehicle to fit their lifestyle.