More inventory is on the way to dealerships, but executives at AutoNation Inc. anticipate it still will take months for vehicle stocks to return to normal levels after supply disruptions following the March earthquake in Japan.
"Sales will improve, but building inventory will take longer," said Mike Jackson, CEO of the nation's largest auto retail group. "I think the cars are going to come in and come out because there's pent-up demand for them."
Jackson, who predicts an industry selling rate of more than 13 million units for the final three months of the year, expects vehicle supplies at dealerships to remain below normal until early next year. After hitting the low point in September, AutoNation's inventory levels are recovering as automakers increase shipments, he said.
In the third quarter, shipments from Japanese automakers to AutoNation's 214 stores were below 20,000 vehicles.
But in the fourth quarter, those shipments are expected to surpass 30,000, according to Jackson. Typical quarterly shipments are about 25,000 vehicles, AutoNation says.
Though skimpy supplies in the third quarter hurt AutoNation's unit sales, the company boosted profits for the period as customers paid higher prices for vehicles. Net income rose 20 percent to $71 million, while total revenue rose 7 percent to $3.5 billion. AutoNation, which reported its quarterly results last week, said gross profit per vehicle rose by $460, a 23 percent gain to $2,454.
Because AutoNation developed a specialized pricing software tool during the quake disruption that helps the dealership group bring top dollar from each vehicle, COO Michael Maroone expects the retailer to retain some pricing leverage. But today's high prices aren't here to stay.
Vehicle margins in the fourth quarter are expected to decrease as supplies improve, Jackson said. Manufacturers also likely will increase incentives and marketing activity as inventories are replenished.
But Jackson, who credits automakers for being less likely to turn to incentives to boost sales than in the past, doesn't expect a price war.
Said Jackson: "The domestics understand that while they've increased their share, they're going to give some back when the Japanese come back into the game."