The ‘Real Future’ of Automobile Distribution in Mexico

COVID-19 made us re-think our priorities and future. It changed our lives, including how consumers make their purchases, and transportation requirements, while opening the door to more efficient ways of working and living that in the past were not considered fully reliable or because there was no need to change it. The uncertainty initially paralyzed the automotive industry but some big dealership groups, including Surman, put hands to action.

Let’s divide this analysis in three phases: Start of the pandemic (First year), Last part of the pandemic (Recovery period) and the real future.

First Year

At the start of the pandemic in Mexico, automobile dealers faced the uncertainty of the definition of essential businesses. AMDA (Mexican Automobile Association) was intensely negotiating with our government to determine dealerships as essential businesses, achieving a partial victory. We kept our aftersales departments opened but were obliged to close showrooms for new vehicles and preowned vehicles. This put a stop to our regular way of operating and made us think about how we should adapt while trying to guess for how many months it would stay that way.

At Surman, we understood we had to change and not just adapt to the new reality. We really needed to evolve into a new way of living and take action toward that. Like most companies, we re-arranged our home: we cleaned our facilities, we arranged those little details that were always there but we were too busy to take care of, and we took advantage of “spare time” to accelerate development and implementation of new digital and IT tools and solutions that were going to be essential in the “new future.”

The main evolution we undertook was to address our team’s needs and doubts as well as understanding and developing our cultural evolution. As we needed to be apart from each other, we learned to communicate using tools like Zoom or Webex, we re-thought the importance and impact of our aftersales department, and we helped the more traditional salespeople to understand all the digital options available for them to continue their sales efforts. We also learned to deal with anxiety and uncertainty, learning how to use those emotions to innovate and create new processes. In summary, we understood we needed to take advantage of the positive side of the crisis and create our desired future.

Recovery Period

Throughout the ongoing months of the pandemic, we learned our environment, market needs and requirements were going to be constantly changing so we developed a learning culture capable of putting into action any new process as soon as possible to be ready to address our customers’ immediate needs. 

Although we were expecting vehicle and parts supply to return to “normal,” it did not evolve that way. The COVID-19 pandemic had impacted several industries in different ways. When the automotive industry was getting ready to come back, we were hit by shortages of microchips and some other components. This has complicated the landscape for manufacturers and dealerships, which are trying to attract customers to their brands where they will find long waiting lists to receive their desired vehicle. 

Although this situation has been difficult, all the effort and changes made in our recent past, while also taking advantage of our new, evolving culture, have helped us find a way to keep the doors open. We have looked after new business niches that have helped different dealerships maintain profitability.

Preowned vehicles may seem the natural option for dealers to focus on but, given the fact that there are not enough new vehicles to deliver, owners will not leave their previous car with the dealership. As a result, dealers have become better buyers, both implementing new strategies and reevaluating purchase amounts, making this side of the business more complicated.

On the other hand, aftersales have taken on greater importance for dealerships to overcome the crisis. As users are not capable of changing their vehicles, they have been taking better care of them.

From the customer point of view, our industry still has serious problems but from the dealerships’ point of view, this situation has allowed them to significantly reduce financial costs from the monthly inventory surplus we used to have previous to the pandemic, resulting in better overall financial results.

The Real Future

What will come next? The industry will recover its production capacity and manufacturers will start delivering more vehicles into the different brand dealerships, reducing the waiting period for customers.

How many more vehicles will they produce? Is market share still going to be the manufacturers’ goal? Will manufacturers redesign their objectives to focus more on profitability? Are dealers going to be mature enough to continue pushing the additional business lessons learned during the pandemic period even though they will have more new vehicles to sell? Will the preowned vehicles business recover its market share? How will the new Chinese brands that took advantage of the known brands’ vehicle shortages impact market shares?

All answers will be defined as we walk through the production recovery and discover the different implementations of the lessons learned during this recent crisis.