COVID-19 has Inspired Change in the Automotive Industry

COVID-19 has Inspired Change in the Automotive Industry

One of the interesting threads of the COVID-19 story is how it pushed businesses to adopt new technology. According to research by McKinsey, the pandemic likely sped up digital transformation by about 10 years. That’s certainly true for auto dealerships.

Dealerships have been on a path to automate and digitize for a few years now, but COVID-19 revved up the urgency. When stay-at-home orders took effect last March, it no longer became viable or safe to sit in a small dealership cubicle for three hours, exchanging information to sell or lease a car.

Following some initial panic about meeting basic business needs—like keeping the lights on, the bills paid, and people employed—we’re now ten months out, and most auto groups appear to not only be adjusting but thriving. In fact, when recently speaking to one of our mid-sized dealership customers, they reported having a record year in 2020. Even though many of the dealerships I work with tend to be early technology adopters, I think it’s possible that all dealerships are capable of pivoting their processes relatively easily. It’s a fair bet to say that dealerships with automated back-office functions are already much more capable of running leaner than other industries.

Automotive service departments were deemed essential during the COVID-19 crisis—people still needed their cars repaired. With much of manufacturing shut down, new cars were scarce. That really increased the market for used cars—dealerships quickly bought them up. Used car prices rose, and I’ve heard anecdotal reports that used car sales nearly doubled for some groups.

Folks also didn’t want to use public transportation or rideshares due to COVID-19 exposure risks. Early on, the rideshare companies hadn’t worked out how to protect their drivers and passengers.

The challenge now is to keep the digitization momentum going. Most dealerships have been in business for a long time and some of those were handed down through the generations. They’ve found success using the same formula for years, but they know that competition is nipping at their heels—and they’re working to counter the threat. The pandemic has spurred them to speed up those efforts.

I recently had a call with someone who’s worked at their dealership for 41 years. Their service department operations were fairly antiquated when the pandemic hit. It forced them to use video applications to record videos of car servicing notes, which they sent to the owner. From there, they authorized the work. Changes like this brought automotive service departments into the digital age.

I think the industry has collectively flexed its transformation muscles over the past ten months, and that makes it easier to move forward with new initiatives. We are seeing traditional brick-and-mortar dealerships mimic online companies, creating a totally online car buying experience, but with the car being delivered from their dealership to the residence as a fairly contactless transaction. There are still many back-office procedures that are paper-based and need to be addressed--receivable issues, issues with F&I (finance and insurance), dealing with manufacturers’ rules.

In our business, for example, one of the biggest hurdles dealerships encounter when switching to automated payment systems is figuring out how to handle dynamic supplier information.  Suppliers who work closely with dealerships are also typically used to receiving check payments by mail. Now, in lieu of COVID-19 and continued work-from-home efforts, suppliers are asking their customers for credit card and ACH payments. That creates an opportunity for dealerships to make the change to an automated system if they haven’t already—or to build on the one they already have in place.

In some instances, it takes a new employee with an outside perspective—whether it’s a CFO, office manager, controller, or an AP staff member—to introduce new process ideas and assuage the colleagues who are comfortable with the status quo. Their understanding of that discomfort weakens the natural resistance that occurs. In this case, the change was brought on by a little molecule called COVID-19. It didn’t necessarily weaken the resistance to change—it made people push for it.

This past year proved that if you can keep your business streamlined—and even digital—you’ll have an edge on the uncompromising competition. It’s also proved that having a forward-thinking mentality and embracing change are vital to a company’s durability. Now that we know we can do it, and we’ve seen the benefits, let’s let that momentum carry us forward.


Pam Cichoke is the VP of Automotive Sales at Nvoicepay, a FLEETCOR company, where she has collaborated with dealerships in the payment automation field for over nine years. Connect with Pam and the rest of our team at the 2021 NADA Virtual Show Feb 9-11.

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