Ride-Sharing Trend Changes due to COVID-19
A new trend pumps new life into the auto industry as consumers are veering away from ride-sharing and buying their own cars.
New and used car sales surged as the coronavirus (COVID-19) shut down the economy and instituted social distancing as standard practice.
AutoNation, the country’s largest dealership group, has reported an adjusted third-quarter profit of $2.38 a share, increasing from its third-quarter 2019 profits with an all-time record high of 102%.
CEO Mike Jackson shares that he thinks “this pandemic/shelter in place has shifted the American psyche in a long-term way. Coming out of the lockdowns, they said, ’So much for sharing everything.’”
Consumers are now seeing the advantage of having their own cars.
Rising demand is observed for all types of vehicles at all prices. Sales have also boosted due to “incredibly low” interest rates, which resulted in consumers qualifying for a more expensive vehicle.
As inventory levels dipped when auto plants shut down for several weeks during the spring, dealers were able to gain more pricing power with fewer incentives offered. This results in consumers paying more for the car.
Kelley Blue Book (KBB) reported earlier this month that the average transaction price (ATP) for a new vehicle last month was $38,723, which is 2.5% more than the ATP for September 2019.
Car dealers are able to increase efficiency and raise profit margins as they find new ways to sell cars, including online transactions and at-home test drives.
The third-quarter same-store gross profit reported by AutoNation totaled to $972 million, an 11% increase compared to the same period last year.
On the other side of the coin, the ride-sharing industry saw an immediate sharp decline in the ride-sharing service.
Around 40% of consumers were found to use rideshares less or not at all, and 49% preferring to use their own vehicle.
Editor’s note on Record Earnings for AutoNation Amid Pandemic:
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