The Economy

Inventory Won't Be a Problem for Most Automakers in the Second Half

Aug. 13, 2012

Most automakers entered the second half of 2012 with healthy supplies of their vehicles. The exceptions include Kia and Hyundai. Competition among the automakers likely will be fierce.

Josh Cable

The inventory issues that plagued Japanese automakers and others in the wake of the 2011 natural disasters are, for the most part, in the industry's rearview mirror.

"Between the tsunami and the flood in Thailand, we're back," Jim Lentz, Toyota Motor Corp.'s top U.S. sales executive, told reporters last week at the Center for Automotive Research's Management Briefing Seminars in Traverse City, Mich.

Toyota (IW 1000/5) began the month of August with nearly 300,000 vehicles in its U.S. inventory, Lentz noted, which "is about our optimal level."

"So we are, for the first time since the tsunami, back to the kind of inventory levels that our dealers like to carry," added Lentz, who is president and CEO of Toyota Motor Sales USA Inc.

The Detroit Three ended the month of July with a total of 68 days of U.S. light-vehicle inventory, virtually unchanged from the month before, according to data from WardsAuto.

General Motors Co. (IW 1000/13) led the way, heading into August with 79 days of U.S. light-vehicle inventory, followed by Chrysler Group at 65 days and Ford Motor Co. (IW 1000/16) at 57 days, according to WardsAuto.

"For the second half of the year, everybody is going to have enough of almost everything, perhaps with the exception of Kia and Hyundai, and some constraints in Subaru's inventory," said Paul Taylor, chief economist for the National Automobile Dealers Association, at the CAR Management Briefing Seminars.

Kia Motors Corp. (IW 1000/103) and Hyundai Motor Co. (IW 1000/27) "were largely unaffected" by last year's natural disasters, Taylor noted, because the automakers get many of their parts from their home country of South Korea and other parts of Asia.

However, Kia and Hyundai have "hit so many homeruns" with vehicle sales that "they've been constrained for over a year in terms of the supply of vehicles versus the demand for those vehicles," Taylor said.

The South Korean automakers headed into August with 21 days of light-vehicle supply in the United States, according to WardsAuto.

Still, with most of the automakers having a healthy supply of vehicles, and interest rates staying low, Taylor said he is "convinced" that U.S. light-vehicle sales will top 14 million this year.

"Everybody is going to be competing pretty fiercely, and the customer is going to find everything they're looking for in the second half of the year," he said.

Delving into data from National Automobile Dealers Association, Taylor noted that small-car sales have slowed compared with last year. Meanwhile, demand for midsize cars has been surging, as consumers look for vehicles that deliver good fuel economy and offer ample interior room for their families.

However, with gas pricing creeping higher, growth in small-car sales could catch up with the growth rate of midsize-car sales in the second half, Taylor said.

About the Author

Josh Cable | Former Senior Editor

Former Senior Editor Josh Cable covered innovation issues -- including trends and best practices in R&D, process improvement and product development. He also reported on the best practices of the most successful companies and executives in the world of transportation manufacturing, which encompasses the aerospace, automotive, rail and shipbuilding sectors.

Josh also led the IndustryWeek Manufacturing Hall of Fame, IW’s annual tribute to the most influential executives and thought leaders in U.S. manufacturing history.

Before joining IndustryWeek, Josh was the editor-in-chief of Penton Media’s Government Product News and Government Procurement. He also was an award-winning beat reporter for several small newspapers in Northeast Ohio.

Josh received his BFA in creative writing from Bowling Green University, and continued his professional development through course-work at Ohio University and Cuyahoga Community College.

A lifelong resident of the Buckeye State, Josh currently lives in the Tremont neighborhood of Cleveland. When the weather cooperates, you’ll find him riding his bike to work, exercising his green thumb in the backyard or playing ultimate Frisbee.