When General Motors launched its “employee discount for everyone” sale in the spring of 2005, its U.S. dealerships had nearly 1.2 million vehicles crammed onto their lots.
This winter, the automaker has only about one-third that much inventory, according to a report by Automotive News. Many pickups and SUVs have buyers within days of arrival, or even before they come off the delivery truck.
It’s no coincidence that GM expects to earn about the same amount this year — at least $10 billion, it projected this month — as it lost in 2005. Executives at GM and other automakers, after pandemic-induced factory disruptions showed what tight supplies can do for the bottom line, aim to keep dealer lots sparser long-term.
“I suspect that you’re going to see a permanent change in our industry. I do not think that we’ll ever get back to the high, high levels of inventory and slower turn,” Sonic Automotive President Jeff Dyke told analysts and investors last week. “We’re all pushing for that, including the manufacturers.”
Of course, there’s a big difference between dealers starving for supply and avoiding the chronic overproduction that pushed the Detroit 3 into destructive price-slashing cycles. Automakers say shortages of hot products will eventually get worked out and that they have the ability to keep stocks trimmer than in the past, thanks to better data and more efficient labor contracts that don’t force them to keep plants running regardless of need.
But it might require some adjustment for dealers, who fear losing business to a rival down the street if they don’t have the exact color and configuration a customer wants.
According to Automotive News‘ 2021 Dealer Outlook Survey of 183 dealership executives in January, most dealers — 59 percent of respondents — expect inventory to meet demand by the end of June, but 25 percent say that won’t happen until at least next year. More than half of those surveyed said the lower stock has increased their new- and used-vehicle profit margins, but 40 percent doubt the staying power of those profits after inventories normalize.