A key component of General Motors’ strategy in the U.S. market is to reduce sales to daily rental fleets, grow retail sales (which are more profitable than those to rental companies), and improve the image of its brands. And a vital part of doing just that is become more disciplined when it comes to inventory.
“Our strategy is simple: grow profitable retail share while maintaining discipline with inventory levels and incentive spending, while reducing rental deliveries,” Kurt McNeil, GM’s U.S. vice president of sales operations, said in a statement detailing GM’s February results.
All of this is in stark contrast to the way General Motors conducted its retail operations in the past: the Old GM didn’t place a particular focus on retail sales, instead being more concerned with total sales, which often meant selling thousands of vehicles to daily rental fleet companies to get rid of inventory that it couldn’t sell at the retail level in an effort to maintain high levels of production at its plants. The automaker also had a knack for strong-arming dealers into carrying slow-moving vehicles that would take months or sometimes quarters to sell.
The plan is working: dealers are enjoying retail sales growth, new vehicles are in high demand, and the factory isn’t pressuring them to take on slow-selling vehicles. But along with the positive comes a tradeoff: tighter inventory.
“We can’t get enough product,” Brad Sowers, chairman of the Chevrolet National Dealer Council and owner of Jim Butler Chevrolet in Fenton, Missouri, told Automotive News in March. “Every dealer is asking me, “Where’s the product?’ When we can get the vehicles, we’re selling a ton. But we could use more in the marketplace.”
Chevrolet’s national vehicle supply, counted as cars that are on dealer lots or en route to stores, averaged 65 days in the December 2015 to February 2016 timeframe. That’s a notable decrease from the 79-day average in the same period a year ago. The brand is facing tight supply of key nameplates, including the Silverado full-size pickup truck, Colorado midsize pickup truck and the Equinox crossover, which is now in its seventh year on the market.
Sowers says that the strategy is generally accepted by the dealer council, adding that it forces dealers to operate more efficiently.
“My personal opinion is that we’ve gotten a little bit fat because money is cheap and I can stack a ton of inventory and it doesn’t cost much,” he told AN. “We have to get better at managing that inventory and selling into the pipeline.”
But Sowers worries that low inventory levels of key vehicles such as the Silverado could hamper Chevy’s ability to competitively sell against rivals, such as Ford and Ram. As of March 1, Ford dealers had a 110-day supply of F-Series pickup trucks; Ram supply stood at 94 days, while Chevy Silverado was the lowest at 77 days.
Sowers says that Ford is “going to work hard to sell those”. “We think the limitation for us is really going to be on the supply side.”
Comments
When year model change-over comes all those extra days of inventory really hurt as the OEM offers factory incentives.
Well this is good news.
Not only does this help GM image and such but it help in ATP for the dealers as well as GM. It also will help the customers with higher resale as there will not be a flood of Enterprise cars choking off their resale value.
As for the Ford and Ram truck issue. Well GM will sell just as many but they will be making more money per unit and resale will only improve over the discounted Rams and fleet sold Fords.
GM and the dealers will adjust and know what they can get. Also the fact is dealer trades are very common today and generally most dealers can get you what you want most times during the year. My last 4 cars were dealer trades and I got just what I wanted in 2 days or less.
Note these fully loaded vehicles not normal mid priced lot puppies too..