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3 ways auto dealers can capitalize on the recovery of demand


Auto dealers are used to significant headwinds. Forecasted changes in mobility trends are forever on the horizon. At least in North America, however, the reliance on vehicles is likely to remain strong. Until there is a vaccine, Canadians will continue to avoid public transportation as well as ride-sharing platforms. Opportunities for cash-strapped consumers, through low-interest financing and decreases in pricing, will be integral components of the recovery of demand.

But with lower margins, the pressure to move vehicles will be even greater. Dealers will need to be agile to capitalize on inventory opportunities. Consumer deal hunting will push many to invest further in digitizing the customer experience. AI and data analytics are already helping to get in front of consumer demand and stand out from the crowd. But there will also be more immediate concerns that our professionals at BDO can help you with. Here are our top three.

1. Surviving the ongoing liquidity storm

Now that government incentives and financial programs have a clearer end in sight, auto dealers are in a position to implement longer-term strategies. In a post-COVID world, financial analysis will mean a lot more than simply managing costs and being lean. Devising time-sensitive solutions to short- and medium-term cash crunches will be crucial. Financial stress testing and risk management are also important steps for addressing past, present, and future balance sheet concerns. With sales likely to remain below peak seasonal levels, transaction level data will require line-by-line scrutiny in order to create saving opportunities.

2. Renegotiating key financial covenants

Juggling old and new inventory, renegotiating curtailments and debt repayment will take time and effort. When OEMs, lenders, and other counterparties are all experiencing financial pressure, it's important to address problems before they arise. Proactive troubleshooting requires thorough and knowledgeable relationship management. BDO's experienced professionals can help you understand your rights under a diversity of contracts and covenants. Finding the best agreement with these stakeholders will play an important part in accessing liquidity so that you can remain as nimble as possible.

3. Being the buyer in a buyer's market

With access to liquidity, the distressed market will present buying opportunities. Competitive dealerships will be able to time their acquisitions better than others and continue their cost reduction strategies while replenishing inventory.

Knowing how and when to deploy capital expenditures will require research and analysis. With the industry in a state of flux, adding to your portfolio and investing in new technologies will depend on a number of variables, from manufacturing to harnessing consumer data.

A multifaceted approach that addresses your organization's specific financial challenges will be fundamental for finding value, competitive advantage, and a path forward. BDO's automotive retail specialists can help you devise creative strategies for tackling short-term liquidity challenges to longer-term strategies for innovation and transformation.

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