Page 34 - On The Move - Volume 17, Issue 4

Automotive Forecasters See
Longer Product Cycles

Automakers once vied to introduce redone vehicle models every five years
or so, with midcycle refreshes along the way. The thinking for the relatively rapid
rotation: Fresh product rules the marketplace.
But expect auto companies to elongate those product cycles, both to save
money and redirect resources to other initiatives, such as electric and autono-
mous-vehicle R&D, trend trackers say during a Society of Automotive Analysts
webinar. “We’re seeing extensions of vehicle life cycles,” says Joe Langley, IHS
Markit’s associate director-North America light vehicle production. “A few years
ago, the race was for five-year, even four-year cycles.” Going forward, he foresees
“seven to 10 years with midcycle updates.” Many people of limited means who still once bought new vehicles will mi-
Automakers suspended production in the spring amid the COVID-19 cri- grate to the used-car market, he predicts. “They are leaving the new-vehicle mar-
sis, fearing widespread infection among factory workers. Plants have reopened ket. The most price-sensitive consumers are the most affected” by the economic
with health precautions taken. But OEMs in many respects are “still in the restart damage the virus has wrought.
stage,” says Langley, who nonetheless is impressed by how adeptly factories Although COVID may have accelerated the swing from new-car to used-car
have resumed operations. It hasn’t been as simple as turning the lights back on. buying among some budget-minded consumers, the virus didn’t start the shift.
The temporary plant closures led to inventory shortages. That’s because New-car affordability sending many consumers to the used-car lot has been an
even though production had stopped, sales didn’t, although they were way off issue for a few years now.
compared with pre-virus projections. In addition to lengthening product cycles, automakers also are expected
IHS now predicts North American production of 12.8 million vehicles this to reduce model trim levels to cut costs, analysts say. “It goes a long way eco-
year. That’s 3.5 million fewer than forecasts in January, before COVID took hold. nomically,” Langley says. It also allows automakers to redirect more resources
The forecast for 2026 is 16.7 million units. to electric and autonomous-vehicle development, says Kevin Riddell, LMC Au-
Automakers this year are launching fewer vehicles than normal, notes tomotive’s senior manager-Americas powertrain forecasting. LMC in January
webinar panelist George Augustaitis, director of automotive industry and eco- had predicted U.S. EV sales of 288,000 this year. After COVID took root, the firm
nomic analysis for CarGurus, an online automotive marketplace. “We’re seeing downsized that forecast to 199,000, or 1.5% market share.
delays in launches,” he says, citing production and marketing issues. “It’s tough Riddell is bullish on EVs. “There are a lot of tailwinds,” he says while fore-
to launch a vehicle now.” casting growing sales. “A lot of EV products are in the pipeline. Incentives contin-
COVID’s economic impact hit low-wage earners the hardest, he says, refer- ue. OEMs (particularly companies such as General Motors and Volkswagen) are
ring to the immediate outlook for new-vehicle sales. “They have not fully re- heavy into electrification research and development.”
turned to the new-car market.” In contrast, few high-wage earners ever left that LMC predicts EV sales in the U.S. will hit 1 million in 2024.
market while middle-income people are coming back, Augustaitis says. Source: WardsAuto

Car Dealership Test Drives Go from First to Last

The test drive once was an initial part of the ing, the presentation of F&I products and assorted er experience? “Many people feel better because
conventional step-selling process at car dealer- paperwork. the customer is more in control,” Possumato says,
ships. The step-selling system hasn’t completely adding, that “the market is telling us these trends
Now, demo drives are among the final steps, reversed itself, but the test drive has moved down are happening.”
says John Possumato, a 30-year veteran of the to something of a relay anchor position. That’s an He recalls early on talking to some dealers
auto business. The switch-up largely came about important spot; in races, the anchor athlete usual- who feared a big shift from in-person to online re-
because of digital retailing in the COVID-19 age. ly is the fastest and most experienced. tailing wouldhurt profits. “That’s not happening,”
Online car selling has been around in a limited No matter at which part of the sales process he says. “Transactions happen online more quick-
way for years but took off when the pandemic took they occur, test drives have always been consid- ly and with profit margins sustained.” Whether
hold. ered critical. For dealers, the demo drive expedites some skeptics like it or not, “online car buying is
Modern consumers use the Internet to do selling. For customers, it’s a chance to meet – and not going away.” Source: WardsAuto
much of the car deal. Then, as one of the last parts prospectively buy – a vehicle of inter-
of the so-called “contactless” sales process, many est. “It has become the last piece of
dealerships, on request, will take test-drive vehi- the puzzle,” Possumato says of the
cles to customers’ homes rather than the custom- demo drive. “It is the affirmation
ers visiting the dealership for the try-out spin. piece.”
Accordingly, “the test drive has become one Not everyone wants one. In a
of the last parts of the (car-buying) experience,” DME Automotive survey of 2,000
Possumato, CEO of Driveitaway, a dealer-focused consumers, 320 said they skipped
shared-mobility and subscription-services compa- the demo drive for whatever reason.
ny, says at Informa Tech Automotive Group’s Sum- Although auto digital retailing
mer Festival of Automotive. unwittingly gained traction when
Possumato speaks of the traditional dealer- COVID hit (temporarily closing deal-
ship selling process that starts at the store with a ership showrooms in many states),
meet-and-greet, then segues into an attempt to consumers seem to like the online
“land the customer on a car.” That’s largely done approach to car-buying, Possumato
during the demo drive. Then come later steps in says.
the process, including price negotiations, financ- How has it affected the custom-
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