Meeting the needs of small fleets that traditionally buy out of dealer stock is becoming an increasing challenge, according to the dealers that service them. "Now that business is better, there isn't any inventory," says one multi-franchise fleet dealer. "We're going to have one long, dry summer when it comes to new vehicles to sell."
That dealer used to carry 1,200 units of total inventory but is now down to about 250 new cars and trucks. "We'd rather have more inventory, but we can't get [the units]," he says.
On the demand side, this has not been a problem until recently. "In the last year or two, it's been a very negative atmosphere going out and knocking on doors," says a Florida Chevy dealer. "The response was, 'look out back, I have 12 empty trucks. Can you give me a buy figure on them?'"
A lot of those companies eventually went out of business. The ones that survived cut back from 10 to 25 trucks to six or seven, he says.
On the supply side, manufacturers are working through the Japan supply crunch and are upping capacity on some hot vehicles. However, in the post-recession economy and with a smaller manufacturing footprint, manufacturers are no longer building an excess of vehicles and then figuring out a way to sell them. Dealers say that manufacturers have been uncharacteristically quiet about capacities for the 2012 model year.
"Until manufacturers know for an absolute fact that business will be better, they won't increase production," predicts one dealer. "And for the dealers who took their inventories down to nothing, it's going to be a long trip back to a full lot."
On top of that, order-to-delivery times (OTDs) have been elongated in the supply shortage. One large fleet dealer's balance sheet reveals that OTDs have gone from eight to 10 weeks to 14 to 18 weeks, which has only further aggravated in-stock inventory issues.[PAGEBREAK]
Sparse inventories and long OTDs will be tough on those companies that delayed replacements in the recession. The companies that were retiring work vehicles at five or six years and 120,000 to 150,000 miles are now turning them at seven or eight years and 200,000 miles, dealers report. It's becoming a maintenance issue. "They're learning that they should have replaced sooner," says the Florida dealer. "They are finding out they need to replace engines and transmissions that they never had to do before."
"One customer told me if he had just gotten rid of the two or three vehicles that cost him the huge repair bills he could have gotten two new vehicles," says one dealer.
And now the supply shortage is coming face to face with a slow, steady ramp up in small business demand. Service and repair industries-such as HVAC, pest control, landscaping and electrical contractors-are coming around as "people are finally having stuff fixed," says one dealer.
New home construction, however, is lagging, which has kept a lid on a key business segment, pickup truck sales. Right now, dealers are reporting 116- to 120-day supplies of pickup trucks at the domestic manufacturers. Pickup truck plants are being shut down temporarily to address the shortage. Some trucks have rebates of $4,500 to move them. It's a good time to buy or lease pickups, if your company is in a position to do so.
The pickup truck market may be changing in this era of austerity, high fuel prices and using vehicles more for their functionality than their image. "It's pretty obvious that pickup trucks are becoming a commercial commodity and are no longer being bought by the average retail buyer," says one of our dealers.
Allowing manufacturers to focus pickup specs, options and sales on the work truck market is good news. To the "air haulers" leaving the market, fleets say, good riddance!