- Fiat Chrysler dealers are complaining the automaker is building too many unordered cars they don’t want: Bloomberg is reporting that the automaker is “making an all-out push to clear away tens of thousands of vehicles that its dealers haven’t ordered.”
- FCA says it has significantly reduced costs due to a new analytics tool it uses to predict sales and is posting record profit margins in North America and seems to have kept its total supply in line with rivals.
- What this means for you, the buyer: seems like a good time to deal.
Fiat Chrysler dealers claim they’re being forced by the automaker to buy unpopular cars they can’t sell. According to multiple reports from Bloomberg, FCA has been loading up its inventory with tens of thousands of extra vehicles that the company’s 2400 U.S. dealers haven’t ordered. Dealers say the practice, known as a sales bank, relegates them to buy vehicles they view as less desirable and likely to move slower off their lots. For consumers, this means now may be the best time to buy a new car from any of FCA’s mainstream brands.
The Bloomberg report says that FCA “disputes” the term “sales bank” as it applies to the automaker’s brand-new sales analytics tool, which attempts to predict exactly how many vehicles—and the exact vehicle trims—it should build. The tool was introduced by a former Amazon executive, Mark Stewart, who became chief operating officer in 2018. According to Bloomberg, it saved FCA more than $400 million in the third quarter. Typically, large automakers like FCA keep a relatively small number of unsold vehicles that dealers have yet to purchase. But FCA, according to an unnamed source in the Bloomberg report, had an unsold sales bank of as many as 70,000 vehicles earlier this month. That may be the reason FCA is now offering employee pricing on many of its models.
However, even if FCA has in fact overproduced and has a glut of less desirable vehicles, the automaker has kept demand on track with its rivals. As of December 1, FCA had an 82-day supply of vehicles compared to Ford’s 93 and GM’s 73, according to Automotive News. Days’ supply is an average measure of how long it takes to sell its current inventory, though higher numbers are not always indicative of a low-demand product. For example, hot-selling vehicles like the Jeep Wrangler (91 days) are in line with other high-demand vehicles like the Ford F-series (100 days). Subaru, on the other hand, runs extremely lean and had a fleet-average supply of 24 days. So does Mercedes, at 37 days.
While companies with larger inventories tend to discount their vehicles more heavily than those with smaller inventories, that doesn’t mean they’re going broke. FCA posted record 11 percent margins and a $2.2 billion profit in North America during the third quarter. It’s true that Jeep and Ram remain the primary reason FCA stays in good health, as Fiat, Alfa Romeo, and Chrysler sales are sinking. Dodge is flat. FCA, in merging with PSA, must readjust its lineup to survive the next decade. But as the late CEO Sergio Marchionne had planned years ago, trucks and SUVs are most certainly the company’s winning strategy.