4 Challenges Facing Post-COVID Car Industry
November 16, 2021
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1. Learning How to Market to Gen Z

While the automotive industry has been focused on marketing to millennials, the next generation grew up: Generation Z, which describes people born after 1996, are starting to turn 26 in 2022. This puts automakers and dealers in the position of learning how to market to this distinctly different generation.

According to the Annie E. Casey Foundation, here are some of the defining characteristics of Generation Z for the automotive industry to keep in mind:

  • They are racially diverse: “A slight majority of Gen Z-ers (52%) is white; 25% is Hispanic, 14% is Black and 4% is Asian.”
  • They were born into a digital world: They grew up with social media and information at their fingertips as the norm.
  • They are financially savvy: After watching their parents struggle during the Great Recession, they are all about conservative spending, stable jobs, and smart investments.
  • They are shrewd consumers: Technologically savvy and habituated to online research, they do their research and value brands that reflect their identity and values, especially when it comes to sustainability and politics.
  • They are politically progressive: Both sides of the political spectrum tend to take a more progressive stance than earlier generations.

2. The Shift to Remote Work

With more and more companies adopting remote work or hybrid work models, which blend both at-home and in-office work, people are driving less. This means cars will be used much less for commutes and more for weekends, evening drives, and shorter trips. Logging fewer miles, people will likely keep their cars longer and purchase fewer cars over their lifetime.

3. The Online Retail Boom 

Industries of all types have been seeing rising eCommerce sales for years, and they’ve only been accelerated by COVID-19. While the automotive industry was somewhat of a laggard before the pandemic, it’s clear that most consumers now want to buy their cars online. Recently, Automotive News reported that 83% of vehicle shoppers said they wished they could shop online.

Carvana reported that it sold 244,111 cars in 2020 — up 37 percent compared to 2019.

And Tesla made the decision to close its stores even before the pandemic in 2019 in order to sell cars online instead. With these trends, more and more OEMs and dealerships are faced with having to adopt from scratch or enhance their digital retail experience and retool their digital retailing strategy.

4. Supply Chain Logistics

Like other industries all over the globe, the automotive industry has been impacted by supply chain issues caused by the pandemic, especially with regard to electric vehicle (EV) parts provided by Chinese suppliers. While at first experts expected the issue to be short-term, it appears that supply chain logistics will continue to be a challenge for a while. This makes diversification of supply chains and efficiency in supply chain management highly valuable to automakers.

“As car companies revisit their value chains, they will evaluate reused and shared parts for new product development,” Forbes reports. “We might also see car companies cut back and consolidate the number of trims, variants and powertrains. Supply chain diversification will open up opportunities for countries like India and Mexico. Meanwhile, Brexit and other protectionist economic policies will favor onshoring rather than offshoring in the future.”

Just like other industries, there are lots of changes afoot in the automotive sector, but as long as automakers and dealers are willing to evolve, they should be able to keep pace with the new trends and meet the challenges along the way.