NADA Day 3: Factory Moves, A Stocking Problem and a Fond Farewell
Several themes emerged in conversations with dealers at NADA that suggest future strain on their factory partner relationships.
Beyond the OEM efforts to push dealers to invest in electric vehicle (EV) charging infrastructure, dealers have their eyes on how factories might compensate them for subscription-related sales of in-vehicle features and systems. An Automotive News piece published during NADA notes how General Motors intends to share future subscription revenue with dealers.
There’s also ongoing debate, and related legislative efforts, around the potential cost of subscription services for vehicle buyers, and the role factories and dealers can/should play in the subscription service model itself. Some view the concept as another step toward direct, factory-to-consumer vehicle sales and another risk for existing franchise laws that, at least for now, give dealers seats at the table. “That’s the thin line that keeps us in the picture,” a Southwest GM dealer shared.
It’s all worth watching close, and it signals another evolution in the multiple ways dealers may make money on the vehicles they sell long after delivery.
Speaking of factories, I was among those who wondered whether any OEMs would follow Tesla’s lead and reduce the MSRP on any of their vehicles—a recent decision that hurt dealers with used Teslas in their inventories. Two analysts shared that they expect at least some MSRP adjustments from OEMs, and perhaps more as vehicle affordability issues continue to crimp retail demand.
Other take-aways from the floor:
Stocking Right. There’s an age-old axiom in used vehicles that you can’t sell cars you don’t have in stock. I spoke with several dealers who use this rule of thumb to justify stocking more vehicles than their rolling 30-day total of retail sales. The dealers add that, in the current supply-constrained environment, they’re better off acquiring vehicles they can now, even if it means they’re over-stocked, because it won’t get any easier to acquire them down the line, when buyers are ready to purchase. I understand the perspective, but it strikes me as risky speculation, especially when all signs suggest higher-than-normal depreciation of used vehicles in the weeks ahead.
Pricing Frequency: I noticed a striking difference in the amount of time and attention dealers apply to pricing the used vehicles they currently have in stock. For example, several dealers who now use the pricing recommendations in ProfitTime GPS, shared that used vehicle pricing is now a daily discipline. They’re using the solution’s Pricing Alignment tool to address vehicle prices that, due to changing market conditions, have fallen out of alignment. Meanwhile, other dealers noted that they also look at used vehicle pricing on a daily basis, but only for units that show up in a “No Price Change in 7 Days” alert. It seems to me that, in today’s more variable market conditions, dealers should at least be examining the price of every vehicle on a daily basis to ensure its competitive position matches where you think it should be.
It’s been an incredible three days with dealers at NADA. Thank you to everyone who stopped by to say “hello,” attended my workshops, joined me for dinner and took time to check out the new innovations from vAuto and Cox Automotive. It warms my heart to feel all the love and mutual respect.
A fond farewell to Dallas, and safe travels home to all!