How to Succeed During the Global Chip Crisis

It’s popular to talk about the chip shortage – and for good reason. The blows just keep coming. First, there’s the slash in vehicle production. Dealers who typically inventoried 600 to 700 new cars now have fewer than 50. I spoke with a dealer in California last week who literally had two new vehicles on his lot.

Then, there’s the subsequent soaring cost of used vehicles. According to Manheim, index prices are 52% higher than a year ago and are predicted to stay that way through June.

Now, rental car companies are scooping up used cars, leaving franchised dealers even more high and dry. Where does this chip crisis go? And how do franchised and independent dealers weather this temporary crisis?

Harness equity mining technology

It’s really important for franchised dealers to harness all technology to find equity in service customers and buy cars from customers already in their databases. A CRM equipped with an equity mining tool can help you identify owners in an equity position and provide incentives for them to simply trade in, or trade up.

It’s key to know your demographic and the vehicles that move quickly for higher profit. Even in this market, you don’t want to buy a vehicle you typically only sell once every couple of months. And please don’t call a customer who bought within the last 12 months. That’s a sloppy strategy and more likely to turn off a customer then get you any business.

I’ve also seen dealers succeed with community outreach events like car shows and customer appreciation nights. These events can motivate customers to visit the dealership – whether they’re in the market or not. When you can start a conversation about getting a customer in into a different vehicle with a lower payment while they’re in front of you, you’re that much closer to a sale.

Prioritize Service staffing and training

Around the country, Service departments are doing record business right now. So much so that customers are seeing record wait times. A friend recently told me his local dealership has a six- week wait time just for an oil change!

Dealerships all over the country are flooded with repair work. That’s a problem if you need additional Service Techs. Techs are increasingly hard to come by — and hard to keep due to intense competition.

In a previous blog, I wrote about the need for dealerships to build their own technicians. By this I mean, recruit early in your local community. Volunteer to speak at a local high school or hold an informational event (food and free items, like movie tickets, always help with attendance!) where you speak about the benefits of the job. The promise of comprehensive training and competitive pay can get recruits through your doors who are trained to follow your processes and live your core values.

Reassign or furlough staff as needed

A dealership with few cars to sell does not need a fleet of salespeople. It’s inevitable that you may have to reassign or furlough sales staff to weather this temporary crisis. Consider re-assigning some staff to your Service department.

Walk your bays and see what’s really going on. Are ringing phones going unanswered? Are customers waiting too long for an MPI? Are Techs leaving bays for non-technical tasks like delivering paperwork, requesting parts or sending updates to customers?

There are some tasks that don’t take a lot of training that when delegated to another employee can create efficiencies that allow you to service more cars in less time.

Stay true to your values

I haven’t heard of any independent dealers struggling. They’re killing it because they bought a ton of inventory before this crisis hit. The temptation any time demand heavily outstrips supply is to charge customers a premium. Be cautious — this situation is temporary. Take advantage of a customer’s need today and they’ll remember and likely avoid your dealership the next time they are in the market.

The most important thing franchised and independent dealers can do is stay true to their values. If you promote fair pricing and then start talking about additional fees, that’s not authentic. Customers are like elephants; they have long memories. If the price of a few more bucks will alienate a customer forever, it’s not worth the extra cash.

There’s no way to predict where this chip crisis will go. But history tells us that nothing stays the same forever. Be the nimble dealership that can quickly adapt and realign, and you’ll come out of this latest crisis just fine.