There has been a lot of conversation the past few years surrounding new-car inventory and prices. What key things can dealers do to stay ahead in 2022’s next three quarters? 

Brian Finkelmeyer, the senior director of new-vehicle solutions at Cox Automotive, said the automotive industry is in a circular pattern of low new-car inventory and high consumer demand. Many dealers are still running with single-digit day supplies, and the recent U.S.-Candian border protests slowed things down further. 

On the demand side, Finkelymeyer said there has been a little softening of consumer sentiment that likely is caused by the global economic hardships surrounding Russia’s invasion of Ukraine.

Consumers still seem to be more than willing to pay full sticker price, or close to it, for new vehicles. In fact, data show that pre-pandemic, 75% of new-car buyers paid below MSRP for their vehicles. Today, 75% are paying exactly the MSRP or above. Despite this, Cox Automotive’s 2021 Car Buyer Journey Study revealed that consumers still are more satisfied with their shopping experiences than they were pre-pandemic.

Industry experts, including Cox Automotive’s chief economist, Jonathan Smoke, are saying supply conditions will improve but maybe not for at least six to eight more months. Dealers will need to be strategic in order to succeed with their inventories during the spring selling season. 

Finkelmeyer said dealers should consider three things when it comes to managing inventory right now:

 

1. Gross profit versus turn. Manufacturers reward dealers who turn and earn the fastest. Button up on any reporting the day before the allocation runs.

 

2. Be mindful of aging vehicles and inventory updates on dealer websites. On average, 15% of inventory shown on a dealer’s website is 90 days or older.

3. About 42% of dealers’ used-car inventories come from trade-ins and new-car sales. It is a critical piece of the business that helps generate the overall profitability of a store.

The EV market still is small, but it is a fierce and feisty segment. In January ’22, about 4.1% of new-vehicle sales were EVs. This will be an exciting year for the industry, said Finkelmeyer. A number of EV launches are taking place, but consumer adoption still is questionable. Many of the launches are full-size EV pickups. Will that be enough to sway the average consumer? Only time will tell.