As SUV and Truck Supplies Dwindle, Consumers Fork Over Full Price — in Texas, at Least
Much has been said about the Big Three American automakers' inability to adjust production in the face of shifting consumer demand. Such criticism was especially loud in 2008 as pump prices neared $4 a gallon in the United States. But now that Ford, GM and Chrysler have reduced production of those gas-hungry giants, what do you suppose consumers can't get enough of? That's right: trucks and SUVs. As The Dallas Morning News advised this week, "If you have your eye on a new SUV, don't blink. It might be gone."
Of course, report comes from deep in the heart of Texas, where pick-up trucks are typically more popular than in some other parts of the U.S., and the evidence it cites comes mostly from the mouths of Dallas area car dealers. They tell the paper that they "are selling [trucks and SUVs] for window-sticker prices. Moreover, most late-model used pickups and SUVs have regained all of the thousands of dollars in trade-in value they lost last summer." Sam Pack, who owns three Ford dealerships in the Dallas area, said that "when you go through the inventory, you find we've got an 18-day supply of Expedition ELs. That's too low. It starts costing you sales."
Ironically, the Dallas suburb of Arlington happens to be the home of GM's only full-size SUV factory, which is in the midst of a two-month shutdown, according to the newspaper.
But the small inventories represent not only the automakers' response to plummeting demand, they may also represent the future of the auto business. Veteran dealer Ron Kutz thinks tighter inventories are probably good for the auto industry. "In the '80s, we ran a Nissan store off a 30-day supply of vehicles," said Kutz, general manager of Grapevine Dodge-Chrysler-Jeep. "There's no way GM or Chrysler should have 120-day supplies. It just makes no sense financially."
For the latest on the changing auto industry from Knowledge at Wharton, see:
How Hyundai Sells More When Everyone Else Is Selling Less
Bailout or Bankruptcy: What Will It Take to Get the U.S. Auto Industry Back on Track?
On the Skids: Are U.S. Automakers Running Out of Time — and Options? (video, with transcript)
