The Chip Shortage WILL Affect Your Dealership This Year. Here’s What to Do

Semiconductor chip shortages, rubber shortages, ketchup packet shortages…these days it seems things are in short supply.

As the world enters the “New Normal,” it is evident that at least for now, the auto industry is facing another major challenge.

The global shutdowns caused semiconductor chip production to slow to a crawl and stocks to drain. The auto industry was not expecting the boom in consumer demand for cars in Q2 of 2020 coupled with decreased production, further spiking demand. Most modern vehicles on the road today use up to 100 or more microprocessors to control everything from fuel economy to infotainment systems. So, fewer chips mean fewer new cars.

As demand for electronics also boomed, technology companies and automotive manufacturers began to desperately fight for their respective portions of a dwindling number of chips.

For auto manufacturers practicing “Just in Time” lean manufacturing strategies, the unforeseen shortage hit especially hard. Several auto manufacturers have been forced to close plants, and the industry is forecasting losses in the billions for 2021.

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In this post, we’ll explore:

• The impact of the semiconductor chip shortage on your dealership.
• What your dealership can do to mitigate impact.
• 6 ways to adjust your marketing to continue seeing success in 2021.

 

What the chip shortage means for your dealership.

We’ve been here before. Whether it was the recession of the early 1980s, The energy crisis at the beginning of this century, the financial crisis of 2008, or a worldwide pandemic. The automotive industry doesn’t shy away from challenges, they rise above them.

This too will pass. Intel and Nvidia agree that automotive will play a critical role in their future business objectives, especially around electric vehicles and autonomous driving technology.

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As we speak, chip manufacturers around the world are scaling their operations in anticipation of this growth cycle. But this will take time. The average chip can take up to four months to get from design to mass production.

Traditional inventory sources such as auto wholesalers and auction houses will continue to increase prices, even as they face additional pressure from companies like Carlotz and Cinch disrupting their established business models. This makes a limited resource even more so, driving up the scarcity of available used inventory.

Logically, this will push many dealers to focus on other revenue channels for their dealerships, like used sales and Fixed Ops.

 

What your dealership can do about chip shortages.

Before rushing to create a buying center and boosting your inventory levels with street purchases, you must first understand what customers in your market are buying and why. Is there any demand for the vehicle you are about to bid on? If so, how much?

Our own Dealer’s Scorecard tool leverages local market-level data to help you see where the demand is in your specific market.

Additionally, you may want to search through your own CRM sold list. This type of data mining can be a bit tedious, but when done correctly, produces incredible results. Look for signals that might indicate a prospective “Street Purchase” lead. What is the history of their current vehicles? Do they service their cars with you? How were they initially closed? Most modern CRMs leverage equity mining tools to feed prospects directly into your CRM, which can significantly expedite this process. Use this data to identify customers with the highest potential to sell their car.

Shifting your focus to Fixed Ops can also be a good strategy. How much of your website is currently dedicated to your service department? Who else provides vehicle parts and services in your market? What makes you the best local option?

Are there any ideal inventory candidates sitting in your service bay right now? If so, let your service customers know!

 

How to shift your dealership’s marketing strategy.

There are some simple tweaks you can make to your existing dealership marketing strategy to ensure you’re reaching the right audience in the right ways.

1. Use keyword research to identify how your audience is searching.

Start with the basics: keyword research. What are customers in your market searching for when they are looking to sell their cars online? What are they searching for when looking for service or parts? Is there a lot of competition for those terms? Take note of which terms have decent search volume and low competition, especially any which are unique to your dealership. Those are the ones you want to own!

You can use a tool like this one from WordStream to find keyword ideas.

2. Create relevant SEO content.

From an SEO perspective, you will want to start creating content around why your customers should trust you when they are ready to sell their cars. Can your customers complete most of the selling process from home? Are you willing to meet customers outside the dealership to provide onsite appraisals? Let them know!

You will also want to start creating content around the fixed ops department. Let them know why they should trust you with the maintenance and repair of their vehicle as opposed to the Jiffy Lube down the street.

3. Get your Google My Business listings in gear.

Dealers can use Google My Business to help showcase their Buying Centers and Fixed Ops initiatives. If you don’t already have separate listings for your Sales, Service, Parts, and Body Shop departments – that is step one. (If you need help doing this, please feel free to reach out to us and we’ll be happy to walk you through it.)

Once you have your GMB listings organized, you can begin optimizing them. Use Google Posts and your “From the Business” to help bring attention to your Street Purchase and Fixed Ops departments and reinforce your relevance for those types of searches.

4.  Pay close attention to your dealership’s reviews.

Don’t forget about your reviews. It’s not enough to get more reviews. Make sure you are responding to all reviews, positive or negative, within 24 hours. There is even some evidence that mentioning specific keywords in your review replies could help your rankings for those terms. So, every time you buy a vehicle through a Street Purchase, make a point to ask for a review from the seller. Be sure to include keywords like “instant cash offer,” “online process,” “great offer,” etc. in your replies.

5. Check in on your PPC campaigns.

From a search advertising perspective, use the insights from the keyword research to create ad groups around “Sell Us Your Car” and “Fixed Ops,” link the ads to your newly created content to maximize your quality score and get the most out of your bids.

Ask yourself, what are your customers seeing when they search “Sell My Car” in your market? Where are they going now to find that information? There might be an opportunity for a conquesting campaign against those who are currently showing up for these types of searches in your market.

6. Promote your dealership across channels.

Leverage other marketing channels to help spread the word. Targeted email marketing, OTT/CTV ads, and social media posts can all be used to promote your new content and drive more awareness and ultimately sales.

What is most important when it comes to your marketing in the wake of this chip shortage is that you approach it with a holistic strategy. No one marketing channel will be the one to shine during this challenging time. Instead, it will be a well-thought-out omnichannel approach that is best suited to help your dealership mitigate the impact caused by the shortage.

 

When will the pain stop?

When will chip production return to normal levels? That is the billion-dollar question. As of this writing, HIS Market Data was reporting that the shortage would continue to impact inventory levels into Q4 2021. Snowstorms in Texas (the center of U.S. chip production) and a fire at Japan’s Renesas Semiconductor factory are not helping matters.

Of course, that is a forecast, and there is no way to be absolutely sure. But, the best guess is what we’ve got to work with. As the Bob Dylan song goes, “You don’t need a weatherman to know which way the wind blows…”

Despite the low inventory and rising prices, the demand for new cars remains strong, pandemic restrictions are loosening, federal stimulus money is flowing, and interest rates are remaining low.

According to J.P. Morgan Chase, the pace of new vehicle sales in April hit its fastest clip in more than 15 years on a seasonally adjusted basis.

It’s important to remember that despite the challenges, things will get back to normal. We hope that this information has been valuable to you and provided a healthy dose of hope in what can sometimes seem like a situation absent of any.