Here’s what to expect from Melbourne car dealers post-lockdown

One of the many groups elated over Premier Daniel Andrews' reopening announcement were car dealers, some of whom have been prevented from conducting on-site vehicle viewings, test drives or even office work for up to 112 days.

Up until now, dealers were relegated to merely fulfilling online orders and conducting emergency repairs and scheduled servicing, but dealerships are now able to offer the full spectrum of their services – albeit with COVID Safe practices in place.

To find out what dealers and buyers alike can expect, we spoke to Victoria’s automotive industry about what will change and what will stay the same.

What are the new rules for Victorian car dealers?

"Dealers in Melbourne will now be able to open their doors to the buying public and also provide service work unrestricted," explains James Voortman, CEO of the Australian Automotive Dealers’ Association.

That means that from midnight on October 27, test drives can once again take place, showroom floors and car yards can welcome customers, workers can return to offices as needed and the full suite of automotive services can take place.

This has already been the case in regional Victoria for several weeks.

However, the Victorian Automobile Chamber of Commerce (VACC) said it was still awaiting guidance as to whether any specific rules were in place for how test drives should be conducted, while another dealer source said they were yet to receive official government advice regarding patron limits for indoor dealerships.

Drive has contacted the Victorian Department of Health and Human Services for clarity on both issues.

"We know from experience that nearly all buyers want to see, feel and test drive before they make the final purchasing decision," Mr Voortman said.

"Showrooms being reopened allows dealers to complete this final important step of the buying process.

"On the servicing front, the return to unrestricted repairs and service will be a relief to many who may have been concerned about impacts on warranty or safety concerns that may have been left unattended."

Should Victorian buyers expect to see deals and discounts to get stock moving?

The consensus among large, multi-franchise car dealers in Melbourne who were contacted by Drive is that it is too early to know if it's a buyer's market, but they predict huge discounts will be unlikely, especially in the wake of recent price rises.

"Some of the brands we sell have stock shortages, so those cars are going out at normal prices," said one major Melbourne car dealer.

"We have a tsunami of cars coming but the early signs are that we have a tsunami of buyers coming too," said another long-standing multi-franchise car dealer.

"Most of the market has drive-away prices, so there's not much (wriggle room) on price any way. I don't see the current climate being a time of mega discounts. Prices have risen across the board."

Paul Hopper, Managing Director of Victoria’s Hopper Motor Group, concurred "the overarching issue is going to be supply", which will prevent major discounts from being applied.

Instead, he urges customers to be patient and plan ahead.

"Consumers should expect challenges regarding availability and timing delays – we have customers placing deposits on vehicles they won’t see until March or April next year."

How have Victorian dealers coped over the last few months?

Mr Hopper’s dealer group employs roughly 260 people and typically shifts 10,000 cars a year, but he says it has witnessed an estimated 70 per cent fall in sales in recent months.

“It’s been 12 weeks since showrooms and yards closed,” Mr Hopper said.

“We’ve been able to operate click and collect and remote delivery, but it’s been a challenge. We’ve lost a lot of cash flow and we hope to catch up.”

Mr Hopper said the majority of purchases have been made by people whose vehicles were written off in accidents and were seeking like-for-like replacements, or fleet buyers.

Private buyers, however, have been holding out for the in-person experience and Mr Hopper said by far the biggest challenge has been the removal of test drives.

Mr Voortman agreed the lack of test drives has created "difficulty", but perhaps not to the same extent as some predicted.

"Anecdotally there have been some dealers in the metro areas that have still managed to sell cars at levels we probably didn’t expect, which is a tribute to their organisational and customer service skills," Mr Voortman said.

"However, the demand for cars has been soft, particularly with so many people unable to travel very far and this has been reflected in Victoria’s lagging new car sales figures."

What’s the expectation when it comes to buyer demand?

"There may well be a degree of pent-up demand from the nearly three months that dealers were forced to stay closed," Mr Voortman reasoned.

Two major factors are expected to drive this demand: a desire to holiday locally and favour road trips over plane flights, as well as a reluctance to take public transport – although the latter has been mitigated by a larger proportion of people working from home.

"We’ve got a large number of pre-bookings, placeholder appointments from people who want to test drive a vehicle or who have placed a deposit and want to inspect the car in person before finalising the purchase," Mr Hopper said.

What will this mean for car sales for the rest of 2020?

Last year, a total of 1,062,867 new vehicles were sold in Australia in total. This year’s running tally currently sits at 644,891 so far in 2020, with three months left to go.

Victoria has been responsible for a national sales slowdown, with state sales recording a sharp year-on-year decline of 57.7 per cent.

Dealers in the state are remaining realistic about the potential to make up lost ground, tempering expectations about a rebound similar to that seen in NSW and Queensland.

"Unlike the Melbourne dealers, New South Wales and Queensland dealers were not required to close," Mr Voortman said.

"Victoria’s recovery may well be different, in that the level of pent-up demand from the Melbourne lockdown will be significant, but I’m unsure how the next two months in Victoria will play out. We will be watching closely."

What’s going to be different in dealerships?

Temperature checks, social distancing, masked employees and unsupervised test drives should be expected when visiting dealers – among other things.

"We no longer accompany customers on test drives, we moved away from accompanying customers because of the risk of infection," Mr Hopper said.

"What we do instead is have extra layers of identity checking to avoid the risk of fraud – we require two forms of ID, strict security procedures and everything contactless."

Mr Hopper said all his dealerships also installed camera-based temperature checking devices at all entry points in June, as well as implementing a QR code reader in order to log guest entries – all part of the COVID-normal operations dealers will likely embrace.

Are dealers likely to make up lost ground before the end of 2020?

"The problem is stock shortages," Mr Hopper said.

"I think what we’ve got to do is take advantage of the pent-up demand, but I think recovery is going to be well into next year – and that’s okay.

"We’ve given up ground but there’s been government support and we have been able to stay open a little bit, unlike other industries.

If we’re able to help others in the community, then that’s what we will do. I’m letting our team know that if someone needs a bit of extra help, you’re going to get a yes from me."