As we navigate Covid-19 and the challenges it brings, the automotive industry is already realigning itself in order to continue business, not just for now, but in a post pandemic world. Whilst we continuously consider what life will look like in the future, what’s clear is that with global business activity having been on pause for months already, the economy must prepare to play catch-up. What happens when economies, businesses or individuals face financial hardship is quite simple – spending habits change.
Despite consumer habits and behaviors evolving over the last few years, the recent pandemic has quickly brought about substantial waves of reform across all industries, and that rings true for those of us who work in the automotive sector. With health and safety at the forefront of all of our minds, the biggest change has been driven by the need to physically distance from one another, which for some has meant a shift in preference as to how they choose to travel. It makes sense then, that people are leaning towards affordable personal mobility options as a way to feel protected whilst also gaining a sense of much needed freedom.
Enter the used car market. The underdog of the automotive industry in many respects, yet one that now holds more meaning for those looking to buy a car but don’t feel they can justify buying a brand-new model. As the financial effect of Covid-19 makes its mark on the buyer’s purchasing power, we’ll find that the decision to buy a vehicle will now take longer than before. Linked to this, and the change in behavior as a result of the current global pandemic, the increasing preference for contactless online transactions has been an evolutionary requirement for businesses across the board. Interestingly, the used car segment was perhaps one of the first to implement this in the automotive industry.
Our experience indicates that buyers very rarely walk into a dealership looking to speak to a salesperson right off the bat – they will have done some sort of research before making the trip. The appeal of online transactions is that they can compare different models based on their lifestyle and budget without the fear of judgement or even the notion of having to buy if they decide not to. Right now, consumers are undoubtedly more money-savvy given the uncertain economic climate and an experience of strained personal finances. For some, a used car will be viewed as a safer way to keep mobile, and once the harder times subside, the car will be traded in for a new one if they prefer, which starts the circle all over again. In fact, more affordable cars, especially those priced under AED 100,000 are expected to be the fastest selling cars and make up the majority of used car sales.
As we look at buying cars post pandemic, more people will gravitate towards buying a second-hand car, rarely drawing a difference between a used car and a certified pre-owned vehicle. However, under the current circumstances the difference is stark, and perhaps even tips the scale towards certified pre-owned vehicles. Even if we put aside the additional warranty for a minute, which is invaluable, especially while buying a second-hand car, a certified pre-owned vehicle would be inspected by technicians who are specialists in the brand make. This gives buyers not just the best value, but also the best in class assurance.
To bring more awareness of this to the buyer, automotive brands are now digitizing the car buying process – for new and used cars. Everything from initial enquiries, evaluation and customisation of features, to booking, financing and delivery - every step of the process can be done in a completely contactless transaction. Now, even test drives are offered at the customer’s doorstep, eliminating the need to visit a dealership. While there will continue to be customers who prefer the traditional route of buying a car by making that trip to touch and experience the car firsthand, the increasing acceptance of online sales and interaction will get stronger.
The trajectory from Covid-19 will depend on how well we as a business community are able to respond to the challenges and adapt to the evolving trends in the post pandemic world. No doubt we will have our work cut out for us, but we must face the uncomfortable road ahead with resilience. It is a time for rapid evolution, and agility. In the interim, as we all adapt to a different way of living and working, the used-car segment is emerging out of shadows of the automotive industry by providing a different kind of personal freedom and desired mobility and for many.