Supply…Oh Dear! Demand a wonderful thing…

Interesting statistics for QTR1 2010 car production in the UK, growth in excess of 90% compared to 2009! A hugely impressive number except when factoring in that BMW’s Oxford based Mini production plant and Honda’s Swindon factory were closed for some or all of this time last year. This only left Nissan in Sunderland and Toyota’s Burnaston plant producing only sold orders.

So wheels are turning again around the world, it seems that the push, pull, push, push, push of the last 20 years of car production, Fear with a capital ‘F’ is driving or in reality stalling transactional activity.

Defining push,  in recent years Manufacturer production capacity and hunger for market share have driven dealer sales in the UK. The strongest of mid volume brands and quality niche producers the only profiteers in a “never mind the profitability see the sales figures environment”. An ever more frantic cycle of targets and full transporters arriving ending with air fields full of cars that no one would admit to. Driving along the M62 and up to Grimsby to look at a dog one weekend towards the end of 2008 confirmed the reality…

“Pull” on the other hand a delicate balance between desirability, acceptable volume and profit for the manufacturer. Or put another way their preferred position.

As the financial crisis developed it became clear the machines had to stop, stock on the runways must be cleared and you can hear the conversation between Manufacturers and bankers. “We won’t do that again”..(Fingers, toes etc crossed as they utered the words). The bank manager of the merged or skint bank saying we can’t fund your stock on the runway unless it has wings and carrys passengers.

So clear the decks they did, various bonuses, sales incentives and campaigns. The major funders and valuation agencies at the time panicking about future values of huge numbers of units returning to a bear market in 2/3 years. Several things happened firstly residual values were slashed. Glasses and CAP future values fell off a cliff. Business written in 2009 was lower in both volume and from the lowest residual base in more than 10 years. So as the manufacturers piled the money in behind the scenes and the dealers threw their margin in. The funders and Leasing companys’ pricing policies were being controlled by their risk managers. Incidentally funders and leasing companys’ in the main are owned by BANKS! Funny that, well if you are into the blackest of black comedy…

So given there was no money to even buy parts in some cases to build cars no one could in their instant panic afford to buy. The factories one by one shut down night shifts and in some cases closed completely. Slow signs of recovery long term reductions in interest rates re assuring the man in the street that still had a job and gently normality, stability and dare write the word confidence started to return.

This co incided with a black hole in the used car market. Less demonstrators, daily rental returns, short term lease vehicles. Plus the inevitable run on what was left of the bargains in pre registered stock. One thing did remain, the view that the car market is on its knees and there is a desperation to write business at any cost…

Suddenly almost overnight the tables turned from discounted runway blockers to, “Yes we can order those 4 BMW’s from the factory they will be around 16 weeks”, or that Golf GT Diesel ordered on the 8th August 2009 that was delivered on the 9th February 2010 (185 days to build a Golf – The peoples car!). This was by no means an unusual situation for the Wolfsberg giant, reaching a stage in the UK  in early 2010 where in desperation it offered disgruntled waiting customers a Peugeot courtesy car as it had loaned out all it’s available VW hire fleet. What if  some of these waiting customers driving a lesser brand courtesy car had defected…? Where in this unprecidented situation i wonder do ‘Brand Values’ sit. 

Assuming our highly valued business and private customers are coming to the market once every 2/3/4 years their view of supply is. “I’ll wait up to a few weeks before we need the replacement vehicle, go to the market get a great deal after all the market is on its…Not too fussed if we have to compromise on the odd extra, but sure we’ll get the cars and a cracking deal, desperate dealers, manufacturers etc…” 

Given that car manufacturers have for some 18 months now been building cars to sold orders, restricting the numbers of stock cars dealers are able to order, plus Bank, Manufacturers and dealer finances have dramatically reduced the capacity for holding stock below is a overview of some of the current supply issues in the new car market place in the UK.

Audi

Q7 Order book full for 2010 – estimated delivery Dec/Jan 2011, A3 Sportback September delivery, Q5 September/October delivery, A6 Avant Multitronic September delivery, A5 15/16 weeks.

BMW

New 320 efficientDYNAMICS 10/12 weeks, Refreshed 3 Series coupe June launch factory orders July, New 5 Series saloon 10/12 weeks, 5 Series touring launch September.

Mercedes

C Class major engine related problems (Injectors) closed production for a lengthy period of 2010 to date. All funding support removed from C200 cdi, C220 cdi and C250. Dealers complaining of heavily limited production of mainstream products. Predicted lead times into 3 months plus…

Volvo

Product restrictions on popular models including XC60 currently September delivery. Their factory closure for re tooling and believe it or not a full order book…

Nissan (UK Manufacturer)

Qashqai their value for money highly rated SUV earliest delivery quoted late August as of last week.

I could go on safe to say the above is not an exclusive list. What next?, well somehow that delicate balance between fields of metal and realistic lead times has got to return…The theory of economics Supply and…Afterall huge manufacturers with equally huge management structures will hopefully get it right!

In the meantime guys, we’ll be talking to you early enough in the lifecycle, to allow you to make the best decisions for your fleet and business vehicles. If you are new to us we’ll take time to discuss the most up to date position. In a nutshell if its desirable or you are willing to compromise or we are very lucky, it’s highly likely you’ll wait longer than you thought before you read this…

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