In August, General Motors’ Cadillac achieved a 77-day supply of vehicles in the U.S. — the brand’s lowest level in nearly five years. When it comes to automotive inventory, the lower the days supply, the better — as it keeps vehicles in stock new and fresh for customers, while also allowing dealers to pay less for stocking (floorplanning) the vehicle. And though the drop in days supply puts GM’s prestige luxury car brand on the right path, it’s still not at the levels that Cadillac president, Johan de Nysschen would like to see. His goal is a 60-day supply, the levels at which competitors such as BMW and Mercedes-Benz manage their inventory. Luckily, Cadillac is already considering a possible solution to further decrease its days.
“Centralized regional inventory hubs”, de Nysschen recently told Automotive News during the recent media drive for the 2016 CTS-V sedan. These hubs can be used by Cadillac’s lower-volume dealerships to obtain vehicles as needed.
“That keeps the inventory fresh and frees them from having to tie up so much capital,” says de Nysschen, adding that the idea is “under discussion” with Cadillac’s dealers.
Cadillac’s competitors have considered a similar approach to keeping inventory fresh. But unlike Cadillac, whose goal involves turning inventory faster, rivals are examining the solution due to ever-growing lineups that make it difficult for dealers to keep adequate supplies of each model and model variant in stock.
According to de Nysschen, aging inventory is a problem for both the dealer and the brand. For the dealers, it’s more a financial problem than anything else, since the stores have money tied up in floor-planning the aging cars. And it doesn’t help Cadillac’s image to have vehicles form previous model years on the lot. Either way, the circumstance usually results in large discounts that negatively impact residual values, negatively impact the brand image, and make a sale less profitable for both GM/Cadillac and the dealer.