Auto dealers and auto makers have been faced with a dilemma this summer. Although sales have been down, partially due to the cash for clunkers program from last summer, the demand has still been there. In a recent survey conducted by Automotive News, 73% of dealers reported that they did not have enough new vehicles in stock, and were losing sales as a result of this. Here is the dilemma. Profits have been posted with the current strategy implemented by the auto makers, which has been to not over produce and sell more vehicles at a lower price, but to produce the amount of vehicles that they expect to sell, and sell these vehicles at a higher price. They can continue to play it safe with this strategy, or take a chance at recapturing those “lost” sales due to lack of stock, and produce more vehicles, believing that they will be able to recapture those lost sales. This is a chance that could be quite profitable, or end poorly if the real demand is not in line with the projected demand. With the economy in the current state that it is in, I don’t expect to see them take this chance, but I’m not so sure that it’s the right decision to play it safe here. What do you think?
August auto sales in the U.S plummeted to their lowest point since February this year. 10.8 million Units were sold, which fell well short of the projected sales of about 11.5 million units, reports Automotive News. This can partially be attributed to the cash for clunkers government program that helped maintain auto sale levels last August. There is no doubt that the 21 percent decrease in sales from last August and the lack of the cash for clunkers program this summer are connected. Obviously cash for clunkers was necessary in order to bring the Auto Industry out of the 21 month slump of losing money that it was in until August of last year, but now that the government incentives have ended so that in effect, the government has taken the training wheels off, the question is, will things turn around? Or will sales once again wane, calling for another governmental intervention? Weigh in if you have anything to add.
In a response to the upcoming federal proposal to implement a letter grading system for new vehicles fuel economy, NADA spokesman Bailey Wood told Automotive News that the National Automobile Dealers Association will oppose the proposed governmental plan. Opposing this proposal was clearly the right move by the NADA, because it was in the best interest of the Auto Dealers, but as a result of this stance that they have taken, they have cemented themselves in a position against the powerful environmental groups that have backed the proposal. And unfortunately for the NADA, this came right after they also recently butted heads with the environmental groups over whether stickers should be put on electric and plug-in hybrid automobiles detailing the pollution that is produced by charging those vehicles, which the NADA was against. The NADA has made all the right moves here, but they have now found themselves in a battle against the government and some powerful lobbyist groups. I’m not sure who will come out on top at the end of this, but it could get ugly. Which party is right here, and whose initiative will get passed? I’m not really sure at this juncture, so weigh in if you have any thoughts or anything to add.