COVID-19 Industry Impact Report: Auto
The coronavirus pandemic clearly affected auto sales in the month of March and the first half of April. On April 17th, vehicle sales were deemed an essential service in revised U.S. federal guidelines, potentially easing the path for auto retailers to restore more normal business operations. For the week ending on April 26th, JD Power data showed the auto market is indeed recovering. As the outlet continues to monitor sales, April decidedly showed an uptick in sales after a crater toward the end of March.[1] While recovery is in sight, the pandemic has impacted the auto industry by fundamentally changing how people view buying a car.
Embracing E-commerce
Electric vehicle company, Tesla, is no stranger to online auto sales. Their e-commerce sales strategy is simple: sell cars directly to consumers through the Tesla website. Stores and galleries exist, but only to serve as showrooms. This approach has proven to be successful; vehicle deliveries reached between 367,000 and 368,000 units in 2019, making Tesla the leading producer of electric vehicles. Concurrently, Tesla's Model 3 has become the world's best-selling plug-in electric vehicle model.[2]
Even with Tesla’s success, U.S. auto retailers have essentially used the internet as a tool to bring consumers into the dealership, not to sell cars. But the coronavirus pandemic is changing that. Fiat Chrysler, for example, launched a new online sales program this month that allows customers to partially, if not completely, go through the sales process online. As with Tesla, the purchased vehicle can be delivered to their home without them ever stepping foot in a dealership.[3] Other automakers, including General Motors, have also made plans to move to online sales programs and are stepping up their online efforts to schedule test drives for as early as the rules allow.
Will consumers adapt to this new norm? A vehicle is a big purchase, especially one to make online, but a recent report from eMarketer shows U.S. car shoppers are increasingly open to making a digital auto purchase due to the spread of COVID-19. Sixty-one percent of respondents showed favorable interest in the experience.
Communicate with Empathy
Brands are pulling or pausing their ad spending as the COVID-19 crisis puts a strain on their businesses, but research shows that consumers do not want them to stop advertising. Kantar COVID-19 Barometer Wave 1 analysis shows that 92% of consumers believe brands should continue communicating right now. They see it as normal, a welcome distraction and a reminder that life goes on. According to BrandZ, strong brands recovered nine times faster after the global financial crisis in 2008. We also know that a suspension of advertising for more than six months can have deleterious effects on brand health.[4]
Yet consumers are clearly cognizant of a brand’s message right now. While consumers don’t expect brands to stop advertising altogether, brands should rethink their strategies. Campaigns that were planned pre-pandemic may no longer be appropriate as consumers look for information about how the crisis is being handled and how they can stay safe. That includes information about how brands are responding to COVID-19. Ford’s Lending A Hand advertisement, for example, showed the support it is offering its customers rather than focusing on sales. This approach delivered 53% brand favorability and is the fourth highest ever recorded in the U.S. automotive market.[5] “Life will return to normal, and it makes sense to maintain brand awareness and portray a positive unifying message, with potential or future consumers now,” notes Causal IQ’s Vice President of Operations, Jennifer Laing.
We recommend focusing on brand-oriented messaging to instill confidence among consumers. Develop creative that emphasizes brand values, cause marketing and other upper-funnel messages. But don’t just focus on one channel. People are interacting with digital media in several ways while at home: TV consumption is on the rise, as is social media and online video consumpt
[1] https://www.cnet.com/roadshow/news/coronavirus-car-sales-hyundai-honda-subaru-mazda-april/
[2] https://www.statista.com/topics/2086/tesla/
[3] https://www.cnbc.com/2020/04/09/coronavirus-pushes-auto-dealers-to-embrace-online-sales-like-tesla.html?__source=iosappshare|com.apple.UIKit.activity.Mail
[4] https://www.kantar.com/en/inspiration/coronavirus/advertising-with-authentic-empathy-during-covid-19
[5] https://unruly.co/blog/article/2020/04/14/brand-building-during-the-time-of-coronavirus/