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What’s Going on With Rising Auto Inventories?

Have we already forgotten the lessons of 2009?

by on Jul.05, 2011

In seriously short supply: the Audi Q7 diesel.

At this point in the calendar, with six months of calendar 2011 auto sales behind us, there is a lot of thumb-sucking going on among automotive writers and analysts. The tsunami upset the Japanese apple cart and deliveries of the two top selling cars, Accord and Camry, as well as the 2012 remake of the popular Civic. But Detroit doesn’t seem to be taking up the slack. Will total sales this year exceed 12 million or not (versus the 16-17 million years not so many years ago)?

I want to suggest a seldom-talked-about metric to the analysis game: days supply, or inventory of unsold models, as reported by trade paper Automotive News, usually at mid-month (so we won’t have the July 1 count until mid-July). But we can look at the last few months’ inventory numbers to see if we can figure out what’s going on and how it relates to the reported retail deliveries.

It’s not necessarily easy.  When GM was recently reminded that it had nearly twice as many full-size pickups in stock compared to what’s considered routine the maker simply changed its definition of normal to make the bulging dealer stocks seem perfectly fine.

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The tradition has long held that domestic manufacturers carry an average of about a 60-day supply of new vehicles for sale. Import manufacturers, even transplants with North American assembly plants, still have long, cross-ocean supply lines and typically have held an inventory of vehicles on dealer lots and in-transit from assembly plants of a much smaller number, say 30 to 45 days. And the inventory, in terms of days to sell at current retailing rates, is even smaller for hot sellers.