Car Dealerships Find New Revenue Streams Amid Supply Chain Crunch

By Joe Connolly and Neil A. Carousso

BRANFORD, Conn. (WCBS 880) — The automotive industry has been facing some of the worst lingering economic impacts from the COVID-19 pandemic. It has forced manufacturing plants and dealerships to make adjustments to its processes in order to serve customers.

A pandemic pivot two years ago at Premier Automotive Group in Branford, CT became an entirely new business model that has optimized the customer experience.

“We came up with a digital model and and quite frankly, it was a model that we had for several years that customers didn’t really use a lot and that’s where they could take the process and buy the entire car online,” said Premier Automotive Group president Robert Alvine on the WCBS Small Business Spotlight, sponsored by Dime Community Bank.

He said 20 percent of their customers now buy and lease cars fully online then Premier delivers it to their home or office.

“We realized that customers kind of liked the process and whether they like the entire process or part of the process, we wanted to keep that digital process in place,” he said. “We at least can tell a customer that we’re going to sell you the car the way that you want to buy it.”

It’s that high-level of customer service that has kept Alvine in business for more than 21 years. He started his career in commercial banking where he saw first-hand the strong relationships between bank managers and their customers. That’s a key element Alvine has implemented at his dealerships.

“We have really tried hard to make sure that we have an authentic experience and a transparent experience for everyone,” he said.

The biggest challenge for car dealerships and their customers are the ongoing supply chain issues. There are fewer cars on the lot than usual, meaning it could take months for someone to get the make and model they want.

“I think there’s going to be an amazing forensic on this entire thing in the supply chain and materials because we’re seeing the complete downfall of the just-in-time inventory processes in manufacturing plants,” said Alvine, continuing, “When the raw materials aren’t available just-in-time, there’s no stock piles with them. And I think some last year, if you look at some of the car companies that made some good gains, they’re ones that might have had some stockpiles of parts.”

He notes car dealerships are “hoarding” the supply of new vehicles that they have on their lots rather than trading with other dealerships as they would pre-pandemic.

“Used cars are rising in price because there (are) more used cars available than there are new cars available,” Alvine said, adding that used cars appreciated 30 percent in value last year. That’s highly unusual for a depreciating asset.

Because people are keeping their cars longer, there’s greater demand for automotive parts to improve used car performance. Premier Subaru in Branford began selling parts online in 2007 under a different branding. Fifteen years later, that adjacent service helped the group survive the pandemic.

“That’s like a supplemental line, if you will and we sell parts, believe it or not, all over the globe,” said Alvine.

Premier keeps its parts inventory in-house.

See more on the solutions car dealerships and manufacturers are coming up with to combat pandemic pressures on the Small Business Spotlight video above.