Automotive News Canada - July 2020 - 20

* JULY 2020

Retail rebound driven by pent-up demand, but for how long?
CONTINUED FROM PA GE 1

per cent, "the good news is we're on the
other side."
The market took "a big step forward
on the climb out of the abyss," said
Dennis DesRosiers, head of DAC.
"June undoubtedly saw the release
of some pent-up demand into the market as blinking consumers took their
first tentative steps out of their darkened lockdown basements and back
onto the sun-kissed roads and highways."
Young said the rebound, "was faster
than economists had anticipated for the
lockdown." Quebec and Ontario completely shut down dealerships for weeks
early on, affecting thousands of stores
in the country's two biggest markets.
"Even six weeks to eight weeks ago,
most forecasters were expecting the
lockdown to last longer and take longer
to tamp down the pandemic," she said.

FLEET SALES TAKE A BEATING
Young said that fleet sales, not higher-margin retail sales to individual customers, have taken the biggest hit.
According to Scotiabank, fleet sales
typically account for 20 to 25 per cent of
the market. They were down 80 per cent
year over year at the height of the pandemic, Young said, and remain down
about 60 per cent.
"Nobody's traveling and a lot of rental business comes from airlines. That's
going to be a slow recovery," Young
said. "Fleet for business purposes will
have a slow recovery as the full impact
of the crisis really hits.
"Retail has really experienced the
rebound."
J.D. Power Canada, which tracks
retail sales on a monthly basis, said
they continued to rebound in June.
"June retail wasn't bad at all, we
estimate it was down 21 per cent, which

is great compared to May and April,"
Robert Karwel, senior manager of J.D.
Power Canada's Power Information
Network, said in an email.
"I think the main thing is we witnessed more of a return to how retail
looked pre-pandemic."
Karwel noted the improvement
in a July 9 report entitled "Canadian
New Vehicle Retail: The June 2020
Landscape."
"Mainstream dealers are holding
their own, and are as profitable as they
were last year, at
least in June," he
wrote.
At Hyundai
Canada, June retail
sales were up seven
per cent compared
with the same period in 2019. While
Hyundai
the brand's overCanada's retail
all, second-quarsales rose in
ter 43.4-per-cent
June as the
sales drop is in line
automaker
with the rest of the
moved away
industry, Hyundai
from fleet
Canada CEO Don
sales. "The real Romano said retail
business is the sales rose despite
retail business, lower-than-average
where you
incentive spending.
can cultivate
The company, he
long-term
said, was already
relationships
making an aggreswith
sive move away
customers,"
from fleet sales -
CEO Don
down 69 per cent
Romano said.
for the year to date
FILE PHOTO
- and adapting the
Genesis online sales platform in ways
that allowed Hyundai dealers to transact more effectively with customers
despite mandated physical-distancing
measures.
"Most companies that do fleet [sales],
if they're being honest, they're realizing

The government needs
to think of a recovery
plan. They had a
pandemic-response plan.
They haven't done anything
about stimulating
the economy.
REBEKAH YOUNG

Director of fiscal and provincial
economics, Scotiabank
that the real business is the retail business, where you can cultivate long-term
relationships with customers," Romano
told Automotive News Canada. "When
people are renting cars, they aren't really looking for that specific brand and
the specific features and benefits that
you put into that product."
Scotiabank's Young said an emphasis on retail offers other sources of revenue - service, financing and more -
that can strengthen the bottom line.

PENT-UP FALL SALES?
She also thinks that some lingering pent-up demand and fiscal savings
remain in the marketplace. Both might
lead to more purchases in the summer
and fall.
Scotiabank estimates that the aggregate amount of money distributed to
households so far through the Canadian
Emergency Relief Benefit (CERB) - a
$2,000 monthly stipend to those who lost
their jobs during the lockdown - was

greater than the total that would have
been taken in through full employment
during the same time.
That - coupled with people working from home, collecting more money,
curbing discretionary spending and not
having entertainment options - means
people have more savings.
"Typically, when households save,
they're worried about the future,"
Young said.
But everything economists learn in
school and throughout history doesn't
necessarily apply during a pandemic.
"Households have weathered the crisis. Now they're ready to spend," Young
said.
Automakers, she said, will sell 1.5
million new vehicles in 2020, but her
forecast comes with a caveat.
"We're still not out of the woods yet."

STIMULUS PLAN NEEDED
Sales might also receive a fall bump
if the federal government boosts its
stimulus, which Young expects to happen.
CERB, she said, "wasn't stimulus. It
was trying to keep Canadians whole.
"The government needs to think of a
recovery plan. They had a pandemicresponse plan. They haven't done anything about stimulating the economy."
A federal budget could include anything from electric-vehicle infrastructure and EV purchase incentives -
both of which align with the Liberals'
green agenda - to a broader stimulus
package that will keep people spending,
Young said.
So far, the majority of spending has
been driven by the lockdown, she said.
"It's hard to know what that [spending] will be six months from now."
- ANC
- With files from
Stephanie Wallcraft.

Dealers hedge bets on costs dropping as pandemic eases
CONTINUED FROM PA GE 1

be something that we add,
being able to go online and
quickly book a service appointment and have someone pick it
up and deliver it. There could
be a surcharge or premium to
that."
Many Ford of Canada dealers who participated in its
"Built to Lend a Hand" program during the pandemic continue to offer pickup and delivery for service and new-vehicle sales even as Canada
reopens, according to a company spokeswoman. The Lincoln
luxury brand, meanwhile, has
offered complimentary pickup and delivery services since
March 2018.

SERVICES POPULAR
Stoneley's comments come
as dealers and automakers
adjust to business during the
COVID-19 pandemic, with
social distancing, frequent sanitization, digital retailing and
vehicle pickups and deliveries becoming commonplace.
Many practices are expected
to remain popular even after a
potential vaccine is approved
and fears about the pandemic
subside.
That can come at a cost,

however. John Hairabedian,
president of the Quebec-based
HGregoire dealership group,
said despite the costs linked to
new services and health and
safety protocols, the
group is on
track to hit
its pre-pandemic budget because
of advertising-spendBulmer: No
ing cuts and
plans to end
complimentary renegotiating vendor
vehicle
contracts.
delivery, but
when the
Still,
pandemic is
Hairabedian
over, some
said he
cleaning
opposes
services will
charging
no longer be
customers
needed.
for such serFILE PHOTO
vices.
"It's not
something that should be monetized. Businesses are doing it
to protect customers for public
safety. I don't see it as a revenue generator. It's more of the
cost of doing business."
But, some industry players
have decided to start charging
for pandemic-related services.
Manheim, one of the biggest
used-vehicle auction hous-

es in Canada, announced in
late June that it would begin
charging $14.99 plus tax to disinfect every vehicle it sells. The
Manheim Vehicle Disinfection
Service is designed to eliminate COVID-19 and other viruses, the company said.
Hyundai Canada CEO Don
Romano said offerings, such as
pickup and delivery services,
are here to stay.
Once it is safe to do so,
many customers will prefer to
head back to the store to talk
with sales and service staff in
person, he said.
"You're going to have both,"
Romano said. "We're still going
to have service drives, but
we're going to offer a lot of different options."
Romano said he does not see
"any monetizations associated"
with such offerings, however.
"Those are some of the
things that we're learning right
now, that some of the pickup
and delivery services are an
absolute convenience for people, and time is money, but a
lot of people are going to want
to take advantage of it."

NO CHANGE, NO CHARGE
Wendy Bulmer, general
manager of Acura of Moncton
in New Brunswick, said her

Dealers have been footing the
bill to doing business during
the pandemic. Some services
will remain and others will
fall by the wayside as the
pandemic subsides.
PHOTO: ISTOCK

store had offered complimentary vehicle delivery
before the pandemic. There are
no plans to change that even as
demand for delivery rises.
Many of the practices
the store adopted because of
COVID-19 are likely to stick,
she said, including sanitizing
vehicles with a disinfecting
fog machine purchased by the
dealership.
"I would expect that we'll
keep up with that and that it
won't be a charge," she said.

Richard Rivard, dealer principal at Leduc Chrysler-DodgeJeep-Ram in Alberta, said new
offerings can lead indirectly
to higher costs, making some
jobs more "labour intensive"
and forcing the dealership to
"spread some duties around
to certain people so that we're
able to handle it."
While he said it might be
unrealistic to expect sanitization procedures to continue
to the same degree once the
threat of COVID-19 subsides,
the dealership's employees
have adjusted and recognize
the need to keep themselves
and their customers safe.
"It's become second nature
to a certain degree," Rivard
said.
Frequent sanitizing at
stores might become a thing
of the past once the pandemic subsides, however, providing potential cost relief to some
dealers, said Bulmer.
"Some of the other things
that are costly are hiring someone to continuously clean all
of the areas that are touch
points," she said. "I would
think that after the pandemic
is gone and it's not a concern,
we would not continue those
practices to the same extent
that we do now." - ANC

Automotive News Canada - July 2020

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