Dealership service departments faring better than sales during Covid: Cox

Touchless services like vehicle pick-up, drop-off, and sanitizing have led to greater consumer confidence in dealership service departments than dealer showrooms, an industry analyst said yesterday.

During an Equifax webinar, Cox chief economist Jonathan Smoke said recent numbers from Xtime, a software provider to dealership service departments, show that service and repair appointments were initially down more than dealer sales were, but that changed when the economy began to open up.

“What we’re seeing now is that service and repair is starting to recover – just as we have seen a recovery in sales – but that service and repair is continuing to have more positive numbers through Memorial Day weekend [while sales numbers flattened before and immediately following the national holiday]. I think this relates more to … people being more comfortable [with service departments] which offer pickup and delivery, and other forms of touchless service including sanitizing vehicles.”

“If you think about it, during a typical downturn service and repair usually thrives,” he said. “It becomes the most important part of a typical dealer business.”

Speculating about light vehicle sales in 2020, he said the latest forecasts suggest a total of 12.3 million units will leave dealer lots this year, at 28% decline from last year’s 17.1 million units.

“I think we’re going to have to be updating our forecast at least every month for the foreseeable future, taking into account what’s really happening in the market,” he said.

Smoke said the bulk of the decline in light vehicle sales will come in the fleet contingent. Retail sales could be down less harshly, perhaps in the 20% range.

He said the real challenge later this year and into 2021 will not be demand but vehicle supply.

As for when we will get back to pre-Covid levels, that’s a lot harder to predict because I don’t think it will be as much a function of demand as of supply. We expect supply to be a bigger challenge in the back half of the year in the new-vehicle market, and it is likely to keep us limited next year, even if we have a fully recovered economy.”