New Strategies Help Dealerships Thrive Amid Chip Shortage

It’s no industry secret – new cars are in short supply right now.

Driven by the nationwide chip shortage, which analysts don’t expect to fully resolve until 2023, manufacturing has taken a heavy hit – with brands such as Toyota cutting production up to 40% this past month. The relatively few cars that are produced are sold long before they hit the lot, leaving dealerships in a challenging spot.

With everyday business disrupted, dealerships have been forced to think outside the box and roll out new strategies to keep themselves comfortably afloat.

One of the most common strategic pivots we’ve seen is dealerships exploring new avenues with inventory. This can take several forms, but the typical approach is to open up to buying used cars from customers regardless of make or model.

Right now, savvy general managers aren’t putting undue emphasis on brand, and are focusing instead on getting inventory where they can. Used car prices currently are sky-high, and it’s possible to squeeze a reasonable profit out of a used-car purchase while also very likely selling that same customer one of the few cars in stock.

They probably still need something to drive, after all.

We’ve also seen some dealerships take a more unique approach: bringing in high-end cars to entice customers and make valuable sales where they can.

Many dealerships can’t get more than a handful of the cars they would typically sell, but we’ve seen dealerships bring in the likes of a 1977 Porsche 911, a Ferrari California or other luxury vehicles to help keep business moving.

Even if they can’t move the same volume as they did before the shortage, this inspired stratagem turns every successful sale into a windfall for the dealership.

Busy service bays have also proved to be an effective shield against the impact from the chip shortage. The threat of higher prices on both new and used cars has resulted in people being highly motivated to keep up on maintenance of the cars they already have.

As a result, we’ve seen a boom in people coming in for service. This is the time for dealerships to double down on their commitment to service. A reputation for quality care and a top-notch customer experience will help turn this initial bump into a consistent revenue stream.

In some cases, dealerships are putting their money on the long haul, taking advantage of this quiet period to make much-needed infrastructure upgrades. This strategy won’t do much to help finances immediately, but can position the store to make a powerful comeback once supply starts to trickle back in.

Jillian Romero Chaves

This means updated phone systems are more important than they have been in a long time. That’s not to say it’s okay to slack on the digital front, though. A streamlined chat system and website will work wonders both throughout the remainder of the shortage, and especially once supply begins to get back to normal.

Above all, this is a time for creative thinking. Dealerships that can take the lead with decisive and well-considered strategies now will be the ones to best navigate around this uniquely challenging hurdle.

Jillian Romero Chaves (pictured, above left) is president of the Ontario Auto Center, one of Southern California’s largest auto malls whose dealership groups offer a total of 19 brands.