Dealer Inventories Could Take a While to Stabilize
Car dealerships around the nation are reportedly having trouble restocking inventories following the prolonged production shutdowns enacted in response to the pandemic. Despite supply chain issues subsiding a bit, Cox Automotive reported the industry only has a 62-day supply of vehicles. That’s approximately 2.3 million sparkly new units, and would be more than enough to keep consumers happy if people didn’t care which model they drove home. Demand may still be suppressed, but the selective nature of shoppers is not.
For example, you may be able to find a Nissan Rogue (the brand’s biggest seller) without much hassle. But finding one equipped how you wanted may be outside the realm of possibility in 2020, depending upon where you live and the fickle winds of fate. And you could apply that same logic to any number of brands, as most continue to note that some suppliers and assembly lines occasionally have to shut down to comply with health mandates.
Neither Ford nor General Motors have managed to return to pre-COVID levels of production, with the pickup segment being the hardest to manage. Dealers have also said Toyota’s Tacoma has suddenly become a rare beast, though the brand is struggling to meet demand in general.
Automotive News championed Southeast Toyota Distributors President Ed Sheehy, who said these production hangups are likely costing dealerships sales, as seeing this one coming. In March, he warned everyone not to turn down allocations because he feared the year would end with demand starting to normalize long before production could catch up.
At Toyota Motor North America, “We have good days and not-so-good days,” said Randy Pflughaupt, group vice president of supply chain management. While each of Toyota’s plants is unique, “in certain instances, our plants or our supplier partners may have challenges due to attendance,” Pflughaupt explained. “If team members were potentially exposed to someone who tested positive for COVID-19, they’re required to self- quarantine for 14 days. Any attendance challenges could impact our production.”
At the same point in 2019, Toyota and its distributors and dealers had 458,123 vehicles in inventory, which at the time was a still-tight 55-day supply of Toyota and Lexus vehicles. At the beginning of this month, it had just 266,131 unsold vehicles available, a 42 percent drop.
A spokesman for Toyota Motor North America confirmed that all of its production plants are working overtime right now.
Under normal circumstances, August would be a little lean due to model-year changeovers. However, the pandemic stalled the launch of fresh product across the board. According to Cox, only 0.5 percent of current inventory are 2021 models, compared with 9 percent of inventory for 2020 models at the same point last year.
“Sales have been stronger than we anticipated, and the consumer has been amazingly resilient — at least those who have jobs and money,” Michelle Krebs, executive analyst at Autotrader, told Automotive News this week. “If you look at the price segmentation, you can see where people are hurting.”
Poorer folks have basically opted out of buying cars, with smaller automobiles (under $20,000) representing the largest inventory surplus. That segment recent developed a popularity problem of its own — in fact, we just discussed it. Meanwhile, midsizers costing a bit more, and which typically sell in larger volumes, have become difficult to stock. The same is true for some of the more affordable high-end models from luxury nameplates. Cox noted that Lexus was the premium brand with the lowest reserves, with just 35 days’ supply.
While not dire straights, it’s an uncomfortable position to be in — and it’s undoubtedly making dealers frustrated. We’re a bit annoyed ourselves, as the industry’s swap to quarterly sales reporting and near abandonment of inventory tallies has made the entire issue harder to analyze — presumably by design.
[Image: Avigator Fortuner/Shutterstock]
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