COVID-19 continues to impact America and the current tract feels alarmingly like the beginning of March. In addition, the upcoming elections and the societal unrest of the past few months have contributed to greater uncertainty in consumers’ lives. Amidst this, people are getting back to regular routines and many aspects of life have returned to some normalcy.

In the auto and mobility space, the winners in the past six months have been those who pivoted quickly in evolving their selling models, those who were aggressive in their marketing efforts, and increased marketing spend in the right areas. Customers are engaging with brands (and each other) more than ever through digital channels and new formats such as AR/VR experiences. All this change will force smart marketers to push beyond the boundaries of their tried and true playbooks and embrace new opportunities. With so many new customer touchpoints, addressable media tactics and personalization platforms available today, the toughest decisions may be what NOT to do.

As we head into Q4, the focus is now squarely on the development of 2021 strategic plans. This year, however, has been like no other, so historical year-over-year metrics provide little direction in planning and forecasting the next phase of our “new normal”. Every piece of data seems to have a big asterisk next to it requiring context and caveats. Foresight is in short supply when it comes to determining new challenges brands will face, so plans have to be more flexible and agile than ever. For some organizations, this can be extremely challenging because their culture is more short-term and ROI focused. Brands that take a longer view to investing in customer relationships, building customer experiences and nurturing brand loyalty by delivering real value will probably see greater overall success. Scenario planning that identifies reasonable contingencies, a test and learn approach to channel investment and innovation, plus a continuous learning plan that reveals core customer insights have never been more important.

Greater agility in marketing processes, automation and deeper audience understanding and targeting are key factors that will drive success over the rest of 2020 and into the next year. Keeping a pulse on changing consumer preferences (e.g. new vs. CPO), while managing inventory availability, and rapidly incorporating these into marketing processes is critical.

Industry Insights and Trends

Driving activity has increased, and transit activity is also slowly inching up, as more people get back to work and normal routines, and transit option in various cities have also resumed operations.

Sales forecast update

In the first half of 2020, registrations declined nearly 23% YoY. As lockdowns lifted and economic activity resumed, Americans who had the means to buy and purchase interest returned to the market more quickly than anticipated. IHS Markit now estimates that 2020 sales will drop to 13.6M units, from 17M in 2019.

The ratio of used-to-new vehicle registrations jumped to 2.76 and 3.09 in April and May 2020, a 10% increase MoM; these are also the highest ratios since the start of 2018. New vehicle sales for large dealer groups were down 21.8%, while used vehicle sales were down 11.2% in the first half of the year.

Inventory concerns still persist

The national days’ supply at the end of Aug. 2020 was 58 days, down from 62 at the end of July and 74 at the end of August 2019. Luxury vehicle inventory is seeing the quickest, steepest decline. The days’ supply of luxury vehicles dropped to 56, from 65 days in July and 79 days in June.

New model year models are delayed

The 2021 model year is rolling in very slowly this year. Only 2.5% of new-vehicle inventory consists of 2021 models. At the same time a year ago, the new models represented 19% of new-vehicle inventory.

Electrification continues to expand as an industry priority

Uber promises 100% electric vehicles by 2040 and commits $800M to help drivers switch. Vehicles in the US, Canada and Europe will be zero-emission by 2030. In the first half of 2020, EVs had 1.5% of US registrations, compared with 1.35% in 2019. Hybrid share improved to 3.1%, up from 2.9% in the same period last year.

Sales and service activity at franchise dealerships is recovering

69% of franchise dealers are now at the same or increased levels of sales compared to 2019, and 74% report service appointments at the same or increased level compared to 2019.

Digital and alternative solutions are working

• 74% of franchise dealers have a digital retailing solution in place.
• 61% of shoppers want to do more of the purchase steps online, compared to the last time they purchased a vehicle.
• 22% of vehicle owners have used pick-up and delivery from dealers within the COVID-19 time period. An overwhelming majority were satisfied with the service, with only 3% expressing dissatisfaction.

Sources: Apple Maps data, Auto News, IHS Markit, Cox Automotive

Consumer Sentiment

Consumers across the US have settled into regular routines. While some routines in personal lives have changed, the return of the school year has contributed to this return.

Compared to a month ago, consumers feel the health threat and their personal life are mostly stabilizing. When it comes to their employment and finances there seems to be a general malaise – it’s somewhat stabilizing but also worsening.

Consumers are split almost 50/50 on their comfort level in public. While overall they feel more comfortable going out in public compared to April, comfort has decreased a bit in the past month.

Heading into fall, a return to complete normalcy still feels far away. In April, over three-quarters of Americans said that things would return to normal in 2020. Now, that number has decreased by 42 percentage points, yet over a third of respondents continue to believe normalcy will return before the end of the year.

Six months into the pandemic, attention paid to brands is leveling off. For months now consumer have told us they are paying more and more attention to brand responses to COVID-19. Now, that has leveled off, with the number of respondents paying more attention decreasing by 10 points while those paying the same amount of attention against a higher baseline has increased by 13 points.

Source: Dentsu Aegis Navigator, Sept. 16, 2020

Consumers expect brands to put safety first. Consumers are open to variety of responses from brands, however, they most want see brands take clear safety measures and take care of their employees before anything else. Brands have a key role to play in ensuring safety as consumers ‘live with the pandemic’.

Latest Trends

Acceleration of new technologies like VR/AR

AR/VR technologies are being fast-tracked to deal with operational and customer service disruptions that have arisen due to COVID-19. These technologies are also playing an important role in the purchase experience, as consumers are able to explore internal and external features of specific models on smartphones or other devices, without having to go into a dealership.

• 71% of auto plant executives are planning or fast-tracking AR/VR implementations since COVID-19; 68% plan to use the tech for auto design.
• Over a third (38%) of those who have implemented AR/VR tech reported a 10-15% increase in savings.
• 65% are leveraging AR/VR for virtual customer service visits.
• Mercedes-Benz rolled out its Virtual Remote Support program to all its US dealerships, accelerated due to the lockdowns. Experts can see what a technician can see in real time through the AR glasses to fix complicated problems. Service turnaround time is much faster and travel times are reduced, which drives greater customer satisfaction and loyalty. A similar program at Porsche shortened service resolution times by 40%.

Bringing the dealer experience home

Though people are a bit wary of going to a dealership, they still want to engage with vehicles as they would do on a dealership lot. Google ranks the following auto shopper activities by preference, as alternatives to a service visit:

• At-home test drive
• Review videos
• Digital showroom
• Online configurator
• VR test drive
• Videoconference

The online car buying and at-home delivery experience is important

18% of auto shoppers would buy a vehicle sooner if there was an online purchase option and they didn’t have to go into a dealership (Google). Letting customers decide the experience they want and then providing best-in-class experiences for each of those choices will help brands develop a competitive advantage over the rest of the year and beyond.

Innovative Creative

AutoNation highlighted its free vehicle sanitization service for teachers, as well as military personnel.

Lucid Motors introduced its new Air, and touted its Configurator capabilities, build for hyper personalization and unique experiences.

Uber highlighted its commitment to transition drivers to electric vehicles by 2025, part of its Zero Emissions quest. Volvo highlighted the advanced safety features on the XC90, one of the most influential factors in the brand consideration journey today.

Brands continue to rely on digital channels and virtual events for new model launches and unveiling.

What We See Working (and Why)

Sustaining (and increasing) marketing investment

Marketing during economic downturns is critical.  Based on research from the Great Recession in 2008-2009, companies that continued to advertise not only captured share when others went dark, but those that maintained or increased their marketing averaged significantly higher sales growth both during and in the years following the recession. Other important reasons include:

• The drop-in competitor advertising creates a white space for your brand to fill. Advertising increases your share of voice and share of market.

• Research shows that maintaining or increasing marketing during a recession gives brands a significant competitive advantage both during and up to three years following a recession.
• Since the cost of advertising drops during recessions, it creates a “buyer’s market” for more efficient spend.

Brands and dealerships who have adopted this strategy are already seeing their efforts pay off. Vera Cadillac in Florida boosted its advertising spend in the early days of the pandemic when others were ramping down. As a result, the dealership ranked No. 1 in GM’s Southeast region for new sales, with sales increases of 91%, 15% and 74% in May, June and July. The dealership also developed new processes and operational practices to increase sales while other dealers were getting rid of inventory.

Fine-tuning digital retailing and the customer experience

In the early days of COVID-19, digital retailing might have been a “nice to have”, but now, it’s critical to survival. 86% of consumers would choose a dealership with an online buying capability over one without. The key point to remember is that each customer has a different level of comfort or appetite for digital experiences, so letting the customer choose their journey, while being present with an excellent experience, will result in higher satisfaction.

As most brands had to scramble to get digital solutions in place earlier this year, the solutions that were put in place were limited in function and not the best in terms of customer experience. Brands that adopt a continual optimization approach to the customer experience, putting up “listening posts” along the way to see what is working vs. what is not, will be in a better place before the big year-end sales events.

Track changing consumer needs: ensure close alignment of marketing messaging, offers and inventory levels

Consumer perceptions and needs have changed rapidly since March. Brands’ understanding of individual consumers may no longer hold true. More recent information is needed to understand exactly where each consumer is and what they want. Integrate data from multiple channels and touchpoints for a richer understanding of customer intent.

On the other hand, brands are also actively managing inventory levels across models, new vs. used, and geographic regions to optimize sales activity. Brands can maximize sales across portfolios, given current challenges, by utilizing marketing for education of specific models and trims. Adopting a more agile marketing process, automation and personalization will help drive highly targeted offers to each customer based on near real time inputs.

In conclusion, automotive brands need to actively address marketing efforts given the new environment to both overcome today’s challenges while also capitalizing on new opportunities. “Navigating the new normal” will require revised marketing guidelines for the end of 2020 and beyond.