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Published in Manufacturing
Zeigler Auto Group President Aaron Zeigler Zeigler Auto Group President Aaron Zeigler MIBIZ FILE PHOTO: KATY BATDORFF

Tight new vehicle inventory could persist into Q3 as demand remains strong

BY Sunday, December 20, 2020 07:20pm

Other than a brief period in the spring when these businesses were shut down completely, many West Michigan automotive dealerships have managed to move vehicles at an impressive clip throughout the COVID-19 pandemic. With 30 stores and 77 franchises throughout three different states, Kalamazoo-based Zeigler Auto Group is on the front lines of automotive retail. The company also operates Zeigler Motorsports, which belongs to another segment that is booming during the pandemic. MiBiz caught up with Zeigler Auto Group President Aaron Zeigler to see if he expects this rally to continue into 2021.

During an event that has created economic hardship across the country, how have dealerships been able to sell big-ticket items like automobiles and recreational vehicles?

Right now, there isn’t a lot of stuff to spend money on. Nobody went on spring break. Nobody did a big summer vacation — maybe they did a small one up north. Kids sports are shut down, you can’t go to concerts, you can’t go to sporting events, restaurants, bars — all that stuff that people typically spend money on. So, people maybe have some extra money to spend, which is why I think they’re buying some of these types of items, coupled with super low interest rates that also make it more affordable. The other piece of it is people have time now — people are bored.

It’s no mystery that many dealer lots are thin on inventory. Is that a significant disruption and will it continue into 2021?

I think inventories are going to stay light through at least the third quarter (2021) because it’s going to take a while for manufacturers and suppliers to catch up. Right now, the market is still outpacing what they can build. When the pandemic originally hit, I thought it would be the first quarter, and then we went to the second and now we’re thinking it will be the third quarter before industry starts to catch up. … Inventory is still down about 45 percent from what it was before the pandemic on the automotive side.

Are you experiencing similar buying habits on the motorsports side?

With motorsports, we’ve been selling every single product we can get. We sold out of personal watercraft this summer and we sold out months in advance, where if someone wants to buy a personal watercraft now, we’re selling into the spring market. Before COVID hit, we had about 1,300 units in stock, which is what we usually carry in total. We got down to where we only had 200 units in stock this summer and almost all of those were snowmobiles and now we’re going to sell out of snowmobiles. We’ve never done that before.

Are you expecting the market to cool down any time soon?

I don’t think, in the short run, it will. Interest rates are a driving factor for our industry and they’re going to stay low for a very long time. There is no inflation on the horizon whatsoever. The Fed has come out and said that for the next couple of years, interest rates will remain low. That really drives our industry. The same things for motorsports, RVs and boats. I think that’s why they’re all doing well right now. I think also there is a little bit of pent-up demand for people that didn’t buy in the spring and summer. So there is a little catch up there. 

The industry is very healthy right now and I think it will stay healthy moving forward because we’ll have all the tailwinds and then you have a healthier economy going forward.

Workforce shortages are an issue that businesses in all industries have had to contend with even throughout the pandemic. Last time we talked, Zeigler Auto Group was creating incentives to keep talent on board. How have those efforts been going?

Our core workforce was fantastic. Our people were amazing. They stayed with us and have done a really good job throughout this and we actually were able to grow our employment throughout the pandemic. … We had some really talented people in our organization that kind of presented some opportunity that may not have come our way otherwise. We have been in really good shape from an employment standpoint.

For many dealerships, the car buying experience changed with COVID-19 to limit person-to-person exposure. How has the process changed at Zeigler and will those changes stick?

Someone can go and buy a car 100 percent online if they want to — literally do the transaction 100 percent on our website and never talk to someone and have a car show up in their driveway if they want to. A lot of people still want to talk to someone, but we’re able to do so many things online that it really shortens the face-to-face interaction that someone has to have. We’ve also done some things where we’re dropping vehicles off at people’s house for test drives. We’re doing the same for service where we’ll pick up someone’s car for service. … We learned to tweak our business to make it as safe as possible for our customers and make it as convenient as possible. Those are things that our customers like, so those are things we’ll continue to do moving forward.

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