Sonoma County car dealers looking to rebound after COVID-19 sales slump
Things got so bad for Jim Bone and his Santa Rosa Kia and Nissan dealerships in the spring as a result of the coronavirus pandemic that he did the unthinkable.
He closed up shop for a month.
Bone said he had no choice because customers stayed away due to health concerns and uncertainty over the economy.
“We were probably the only auto dealer to do it, sales and service, just to see how this was going,” Bone said. “We closed for the month of April. It was very painful.”
Jim Bone Auto Group has been able to make its way back as customers started returning. And he was grateful for the U.S. Small Business Administration’s Paycheck Protection Program that has allowed him to recall 95% of his workforce.
Overall, the auto group’s sales are down 25% so far for the year compared to a year ago, but he is optimistic after making it through the rough patch during spring.
“What we are finding, the people who are coming in are very serious. They’re buyers. They are not out kicking tires. From that perspective, things are good,” Bone said, also noting that he’s fortunate none of his employees have contracted highly contagious COVID-19.
“We’re hanging in there and weathering this storm. I certainly have a lot of friends in the community that are worse off than us,” he said.
Bone’s story is similar to what’s played out across the local auto retailing sector this spring. Dealerships grappled with a halt in demand since mid-March, combined with car and truck production stoppages and a shutdown of wholesale auctions for used vehicles.
That all sideswiped new car registrations in Sonoma County. Registrations declined 24% from January through May compared to the same stretch in 2019, according to Experian credit reporting agency.
A survey by Cox Automotive conducted in the spring found dealers had an overall negative outlook though franchised dealers expressed more optimism heading into summer.
Locally, spring brought furloughs, which included Freeman Motors with 107 temporary layoffs in April; Manly Honda with 82 temporary layoffs in March and CarMax with 70 furloughs in April, according to filings with the state Employment Development Department.
As car buyers initially stayed away, dealerships at the same time also were affected by their inability to get more inventory.
Platinum Chevrolet in Santa Rosa headed into 2020 still recovering from light inventory as a result of the United Auto Workers’ strike against General Motors last year. Then production was halted again with the pandemic, when GM pivoted to make 30,000 hospital ventilators by the end of August for the federal government.
“It did put us behind the 8-ball again, as far as inventory is concerned and inventory is starting to show up. Inventory is part of the story,” said Todd Barnes, president of the dealership.
His family dealership’s revenue from sales and service was down by half in the spring compared to the same period of 2019. In July, the business is back to about 90% of revenue from same time last year.
Edmunds, a Santa Monica-based research firm, found that the lack of supply of new cars has car shoppers turning to the used-car market and certified preowned vehicles. However, there was a problem with that market as wholesale auction houses across the country that provided such used vehicles to dealerships also closed for months.
“Used car prices are through the roof because inventories are low for both new and used,” Barnes said.
In response, Platinum launched a campaign to pay cash for cars on the spot — made easier with an online appraisal. “We are having some results trying to adjust to the market,” he said. “The vehicles were just not available.”
The pandemic also has changed buying patterns as auto retailers are handling much of the transaction process online out of public health concerns. Tasks such as paperwork for vehicle registration and financing largely can be done digitally rather than sitting in the showroom. One notable change is all test drives are now held without a salesperson because of the COVID-19 restrictions.
That has led to more flexibility for sales staff at Hansel Auto Group, giving more time to devote to other duties than being occupied on average about 30 minutes in each test ride, said Justin Hansel, who manages his family’s business of eight dealerships and manufacturers such as BMW, Honda, Toyota and Ford. On average, a salesperson would do about three test drives a day.
Forgoing those ridealongs as well as the trend to do more online paperwork likely will result in his dealerships carrying fewer salespeople in the future, Hansel said.