The ongoing vehicle inventory crunch will prompt dealers and automakers to make long-term changes to their approach to sales and inventory.
Lighter vehicle stocks offer lowering carrying costs, said Michael Carmichael, president and CEO of Stratford, Ont.-based UpAuto. But without vehicles on-hand, converting used buyers to new buyers or convincing service lane customers to look at upgrading, has been a challenge.
“We have many lost opportunities with people who are coming in to kick tires,” he said during the Oct. 5 edition of the Automotive News Canada Retail Forum: Dealer Discussions digital event.
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Steve Milette, president of Nissan Canada, said the automaker’s top priority since the shortage of microchips began limiting output has been to focus on building as many of its newly launched vehicles as possible.
The inventory crunch has also accelerated a cultural shift initiated by Nissan about four years ago. Instead of the automaker “pushing” vehicles on dealers, dealers “pull” vehicles they need from the automaker, Milette said. This translates to lower carrying costs for retailers, less risk of damage to vehicles and faster turnover times.
“I do believe the future is one where we do sell from stock, obviously, but there is a higher propensity of pre-sales that come in,” Milette said.
It is one of several areas automakers and dealers will likely be collaborating on. With the rush to get vehicles from the lot to customers’ driveways as quickly as possible, Carmichael said the shortages have given dealers and automakers more common ground than ever.
“I've never worked as closely with the manufacturers as we are today to ultimately look after the customer.”
And despite the supply issues, Carmichael said looking after buyers has proven relatively straightforward.
“Customers are being extremely, and frankly shockingly, patient and understanding from a sales floor experience.”
UpAuto, which operates three dealerships selling Nissan, General Motors and Subaru vehicles, has put frequent, clear and proactive communication at the top of its agenda. Carmichael said being upfront with customers about the issues it is facing and avoiding overpromising to try to lock in sales has been integral.
This transparency will remain crucial as the period of lightly inventoried car lots drags into 2022.
Sam Fiorani, vice-president of global vehicle forecasting at U.S.-based AutoForecast Solutions, said dealers and automakers should not expect much relief on the chip shortages before the middle of next year.
“This isn't something we can turn around quickly,” he said, noting that more than 10 million vehicles have been removed from production schedules worldwide this year.
And with vehicles only getting more complex, the auto industry’s chip demands will keep picking up, Fiorani said.
“Hopefully the industry learns from this and brings [chip production] onshore so that we can avoid other problems that might pop up like a viral outbreak or regional strife, or potential trade issues that could halt importation of parts from anywhere in the world.”