Before jumping feet-first into this rather heated debate, we’d like to preface with the following: at this stage, any opinion on shortages is little more than a shot in the dark. While we can use past trends to try and understand how our current predicament might resolve, ultimately, time will tell how long shortages persist and if there are any long-term repercussions or changes to the industry. In putting the wide-ranging challenges from shortages, more local challenges, and the potential impacts on the industry as a whole into perspective, we hope to create a big-picture analysis that might lend insights along the way. Let’s dive in!

The state of shortages

Assuming you don’t live under a rock, you’ve likely heard about and/or experienced first-hand the many shortages currently impacting the automotive industry. From manufacturer-level chip shortages resulting in a lack of automotive stock and empty car lots to spare-part shortages impacting parts and service departments and garages in almost all regions, the reverberations of the pandemic are being felt at every level. Although these shortages have created numerous problems for dealers and repair shops, they have also brought with them a new level of demand for innovation and used-car sales and refurbishments. Demand may actually be the one metric that offers the most promise of relief to dealers- more on that later. Currently, the outlook is murky, but most experts agree these shortages will last at least another year or two. 

Recessions and innovation

While the current shortages are nowhere near recession level and increasing consumer demand is keeping dealers afloat, historically, tightening markets lead to some of the biggest innovations. In a study by Lund University evaluating how the financial crisis of 2007-2009 impacted research and development, researchers found the economic downturn had little to no impact on R&D expenditures. Additionally, Automotive News explored how the ‘08 crash caused a measurable boom in innovation and helped dealers mold their operations to better withstand future downturns. Time will tell just how these car and parts shortages trigger innovation, but we can safely assume the outcome will be an evolved automotive market- one that has adapted to meet demand by factoring current conditions.

Areas of opportunity

Within the challenges lie many opportunities for dealers. We’ll briefly touch on a few, but keep in mind only those on the front lines are witnessing true demand and challenges and they’re the ones that must be willing to adapt to that unique information. What will work for your operation might be completely different than another manufacturer in a different geographic market. 

Digital expansion

If you haven’t already, this is the season to completely digitize your dealership. That means online sales, digital marketing, and expanding your parts sales to a national market through online listings.

Used car/certified pre-owned sales

While new inventory may be tough to come by, there are still many vehicles currently in circulation that could be turned into profit through your used car or certified pre-owned sales department. Consider how you might encourage car sellers to sell to you, how your used-sales marketing could expand and adapt, and how you can reach buyers and sellers through the quickly-growing digital market.

Data-driven inventory management

With new constraints, it’s more important than ever that your DMS accurately represents your inventory and is configured to keep your shelves free of useless stock by liquidating the parts you don’t need. While the rare Parts Manager is able to keep their inventories clean, the majority are being faced with the impossible task of managing too much at once causing wide-spread dysfunction in their parts and service departments. To be clear, this is not the fault of the Parts Managers. We’ve found even the tidiest operations can suffer from the overload on PM’s and, while some can maintain homeostasis, they are often unable to grow their parts and service profits. PartsEdge was created to solve this crisis and give Parts Managers the support they need to focus on growing the business. We make inventory optimization simple through daily DMS optimizations, custom matrixes and pricing strategies, and so much more. To learn more about how PartsEdge can help your operation, check out our ‘Solutions’ tab. 

What do you think- will shortages last? Will they change the industry forever? Leave a comment below!

We’ve created an extensive library of free e-books, DMS education, parts inventory education, and more editions of this series exploring industry trends and helping you prepare for the future of the industry.

Thoughts, questions, or opinions? Get in touch!