They warned the pandemic could be a catastrophe for auto dealers. The reality couldn’t be any more different.
In the early days of the pandemic, many observers predicted that Quebec’s auto dealers would run into financial difficulties. Despite this, several dealers have posted surprisingly strong results, even when excluding the emergency wage subsidy. Even the dealers that experienced a slowdown at the beginning of the pandemic have returned to positive performance.
These strong financial results reveal a major shift in consumer trends over the course of the pandemic. Remote work, concerns about social distancing on public transit and online sales all appear to have influenced consumer purchase patterns in Quebec. In turn, these changes in consumer behaviour have forced auto dealers to realign their strategies in order to seize new business opportunities.
Online shopping and the digital transformation
One problem that dealers have had to face is supply chain challenges. In Quebec and across Canada, auto dealerships have reported drops in new vehicle sales. Despite this, sales of used vehicles saw major growth in the past year, fuelled by online sales.
Auto dealers have recorded a significant increase in e-commerce sales over the past several years. Online sales rose by 168% between 2016 and 2019, totalling $161.3 million. Soon, consumers in Quebec will be able to purchase a car entirely online, once the government authorizes the use of e-signatures for car sales.
Today’s consumers increasingly shop on the internet, even when it comes to making large purchases like a car. Dealerships have responded by moving new and used vehicle sales online.
This, in turn, has accentuated their digital transformation needs. The preference for online shopping is probably here to stay, even in the post-pandemic world.
To ensure the long-term viability of their business, managers of auto dealers need to prioritize solutions that incorporate strategic innovation and technology. Nowadays, they need to offer consumers tools that save them time and facilitate their purchase experience. Auto dealers must identify their unique selling point and anticipate their customers’ needs. By adopting flexible planning, they’ll be able to adjust to the shifting preferences of consumers.
Opportunities for sales and acquisitions
Before the pandemic, some dealership owners who planned to sell their business to an external buyer weren’t sure if it was the right time to sell. Since then, the strong financial performance by many of Quebec’s auto dealers in the past year has fuelled a number of acquisitions. There is now a range of opportunities on the market.
And despite the pandemic, there has been an increase in the number of transactions between auto dealers in Quebec: 22 were recorded between September 2019 and September 2020, compared to 16 in the previous annual period.
If your plans include selling your dealership, it’s important to plan adequately for this important step. The sales process is complex and requires a carefully thought out approach. Significant time and effort must be invested to ensure a successful transaction, for the best possible sales price, that ensures the longevity of the business. Do you know what the value of your business is? What about taxes?
The same considerations apply when you acquire a business. Do you have the capital to finance one or more acquisitions? Do you have legal and accounting partners who can guide you with your transactions and help you set up a growth plan?
The pandemic has created new opportunities for auto dealers, and you too can benefit. Effective preparation will help you get through all the steps with peace of mind.
The pandemic has forced auto dealers to improve the ways they manage their expenses. This partly explains their strong performance in the past year, following previous years of positive results. Now is an excellent time to review your corporate, organizational and tax structure so you too can seize the new opportunities that arise.