Driving sales: Demand high, inventory low for many auto dealers | Business
October 11, 2020
TUPELO • A truck carrying eight GMC trucks and SUVs was on its way to the Dossett Big 4 dealership last Wednesday. Before the vehicles could be unloaded, four had already been sold.
At Dwayne Blackmon Chevrolet, the redesigned 2021 Chevrolet Blazer is in high demand, and owner Dwayne Blackmon can’t get midsize SUVS and trucks fast enough. The Blazer saw its best quarter ever, with sales up 45%, General Motors said.
For automobile dealers, 2020 is shaping up to be a pretty good year, especially considering a rough second quarter when the pandemic shut down factories and consumers pulled back on spending. While sales for the year are lower compared to a year ago, most automakers’ third quarter sales improved from the second quarter.
“We’re up; we just wrapped up September, and it was better than last September,” said Rudy Dossett, whose dealership sells Buick, Cadillac and GMC. House of Honda also operates under the Dossett umbrella. “Parts, service and sales are all up.”
But like many dealers, it’s not sales that are the issue, but getting enough inventory. At Dossett, the top-selling GMC Yukon is in high demand but short supply.
“It’s the hottest thing out there, and you can’t get them,” Dossett said. “They’re about three months behind. The Cadillac Escalade is also seeing a big change.”
Joe Marshall, co-owner of the Barnes Crossing Automotive Group, has 11 dealerships, including eight in Mississippi. With a swath of brands in his portfolio – Hyundai, Mazda, Kia, Volkswagen, Mitsubishi, Chevrolet, Buick, GMC and Ford – Marshall is seeing an unprecedented demand for all vehicles. The pandemic was a short-lived hit, but sales have continued to pick up since the spring.
“The reality is that the only month that didn’t work well for us was April,” Marshall said. “People still needed cars, trucks and SUVs, and they’ve been buying them.”
Shares of Group 1 Automotive, a publicly traded automotive retailer with 186 stores across the country, shot up last week as it reported strong third quarter earnings. It said its results were despite lower inventories, as higher selling prices and profit made up for the losses in sales.
With growing demand and supply still strained, combined with low interest rates and low gas prices, the industry wasn’t quite ready for the resurgence in auto buying.
“The supply chain did slow down and the prices of trucks primarily went up, as did SUVs a little,” Marshall said. “Car prices stayed about the same. But prices within the last couple of weeks have settled back closer to norm, but for a while there they were elevated 10-15%”
While SUVS and trucks have been harder to find, dealers are also seeing growing demand for cars.
“Pretty much all the cars are gone,” Dossett said. “Cadillac has a new CT5, which is a mid-size sedan, and it’s selling pretty good.”
In fact, a red CT5 was on the showroom floor Tuesday afternoon and was sold Wednesday morning to a customer from Indianola.
The Dossett lot isn’t as full as usual, and Dossett said it’s been that way for a couple of months, a big change from half a year ago.
Blackmon said the market for used cars also is strong.
“Prices are a little higher, too, because of the demand, and the inventory there is low, too, along with the new vehicles,” he said.
Sales growth in the U.S. automobile industry in September marked the first monthly rise since February, with strong demand for trucks and sport utility vehicles acting as primary drivers. With the tighter inventories, car buyers paid an average of $35,655 for a new vehicle during September, up 5.6% compared to a year ago.
And there may not be a letup in the fall and winter as automakers try to catch up to demand. U.S. consumer confidence rose sharply in September and reached the highest level since the coronavirus outbreak. Additionally, the Federal Reserve is looking to keep rates near zero through 2023 and has pledged to continue pumping in stimulus until the economy is back on track, which should encourage lending and boost consumer spending, analysts say.