What to do now with falling gas prices
With oil prices trending down in recent weeks, there’s a lot of confusion in the marketplace. In particular, there’s a great deal of speculation about the values and desirability of gas guzzling SUV’s and trucks. As I’ve noted in previous postings, the smartest guys took their initial losses and replaced these units with lower cost units and found strong demand at the new price point in spite of high gas prices. At the same time, others refuse to take the bullet, insisting that it was only a matter of time before gas prices fell, fall arrived and the prices rebounded. Regardless of the approach, the question persists about what to do going forward.
Recent times clearly support my long standing premise that your past sales performance has little relevance to your future sales success. Case and point: when fuel prices were shooting up, past sales history would have said to stock those SUV’s and trucks that historically did well. Now that gas prices seem to be moving downwards, those same tools that recommend inventory based on history would keep the breaks on SUV’s and trucks when maybe, just maybe it’s time to reexamine the desirability of these models. These conditions clearly make the case for keeping your eye on the live market and being flexible in terms of what you stock. So what is the right answer in light of falling oil prices?
I think that the answer is that none of us can be really too sure what the future holds. If gas prices go down and stay down, it’s quite possible that we may see values and desirability for SUV’s and trucks come back. I think, however, that there is enough instability in the market to create sufficient doubt so as to allow these vehicles to come back in a big way any time soon. In light of these conditions I would prescribe a cautious approach. I think that it makes sense to stock a conservative quantity of SUV’s and trucks, but I stress the word conservative. I wouldn’t want to be caught long on these items should gas prices spike back up, but on the other hand, I’m not willing to ignore the fact that we are in the midst of the four-wheel drive season set against the backdrop of lower gasoline prices. In other words, proceed ahead but with careful and conservative quantities.
On the flip side of the gas guzzler issue, are the fuel efficient cars that we all paid up for recently. I would urge you to reconsider your pride in these vehicles as fuel prices trend downwards. If you’re not paying attention, I’ll let you in on a secret: we are seeing the day’s supply of compacts and subcompacts leveling off, and in some cases, even beginning to rise. This is an early signal of what I think is a present market trend that is spurred by decreasing fuel prices. Once again, it is your ability to see these trends as they develop in real time that provides the ability to respond. It’s the difference between driving with your eyes on the road ahead and around you versus in the rear view mirror. The road ahead is anything but straight-forward and sure to throw us a curve at any moment. Stay alert, be willing to react quickly and most importantly, keep the wheel of your inventory turning.