Looking for a fresh> new luxury car or sport-utility vehicle for Christmas? You may have to settle for getting an order form under the tree.
Some of the most popular luxury vehicles particularly crossover-utility vehicles and all-wheel-drive cars sold so well in November that by the end of the month there were hardly any left, by normal industry standards.
December is traditionally a hot month for luxury car sales, but with inventories at a low, prospective buyers may have to order theirs instead of taking one home from the lot. WSJ's Joseph B. White explains how this could work in their favor.
Volkswagen AG's Audi brand had just 11 days' supply of its new Q5 crossover on dealer lots as of Nov. 30 or just over 1,000 vehicles following a month in which customers snapped up 2,310 of the vehicles.
BMW AG dealers were running low on their crossovers, too. The company has almost none of the outgoing design of X3 compact crossovers left, and is just now starting to deliver redesigned models from its U.S. factory. The recently redesigned X5 BMW's big crossover is selling fast, too. BMW dealers sold more than 4,000 crossovers in November and had just 2,303 on hand nationwide.
Mercedes-Benz has more inventory on dealer lots but it could sell all the crossovers it had left as of Nov. 30 in 46 days at the current pace. Dealers say the company has promised to replenish supplies this month, the better to make deals with shoppers lured by the ubiquitous ads in which Santa Claus appears as a Mercedes shop foreman.
At Porsche of Silver Spring, Md., sales manager Chas Conklin says a customer looking to drive home right away in one of the German sports-car maker's Cayenne crossovers won't have much choice. "I have one," he says a silver Cayenne S.
As with the overall auto industry, the recovery in the luxury-car market is uneven. Long-in-the-tooth models that haven't had significant upgrades are moving slowly. But fresh designs particularly those with German brand names are selling briskly, even though industry analysts say the holiday season discounts this year aren't as generous overall as a year ago.
AutoNation, Inc., the nation's biggest auto retailer, is placing big bets on luxury-market growth by buying or building new luxury-brand showrooms in Miami, suburban Chicago, Dallas and suburban Los Angeles, while renovating a dozen of its Mercedes-Benz stores.
The luxury market is moving in a direction that most car makers and some dealers could only dream about for years it's becoming more of a made-to-order business.
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In the old auto industry business model, dealers stocked a lot of different cars and trucks in a wide array of colors and option combinations to serve customers who wanted to drive in, find a new vehicle, make the trade, and drive out more or less on the same day.
After the economic crisis left dealer lots full of unsold inventory, luxury-car makers and dealers now are doing things differently. They want to keep the dealers' supplies of cars and crossovers as lean as possible, and persuade more customers to custom order their vehicles or work with dealers to find a vehicle with the color and option combinations they want in the "pipeline" that extends all the way to BMW's factories in Germany (or South Carolina).
"They want us to sell vehicles before they arrive," says Frank Ursomarso, chairman of Union Park Automotive Group, which owns a collection of dealerships in Wilmington, Del. To encourage customers to order, BMW offers certain colors and option combinations only on vehicles that are ordered for a customer not on vehicles a dealer orders to sit on the lot.
BMW isn't at a 100% built-to-order system, but about half of the BMW X5 models sold now are spoken for before they hit the showroom floor, a company spokesman says.
Other luxury brands are moving in a similar direction, emboldened in part by confidence that affluent Americans are coming out of the defensive crouches they assumed during the economic slump.
For customers, the low-inventory/custom-order approach offers pluses and minuses. It's great to get a car the way you want it especially when the vehicle's purchase price exceeds $50,000 or $60,000 or more.
The minuses include waiting longer and paying more for that car.
BMW, for example, was offering discounts that averaged $5,600 a car last November, according to data from Truecar.com. This year Truecar says BMW's average discount has dropped to $3,350 a car. Mercedes-Benz's November discounts were down $800 a car from a year earlier; Audi's dropped 8% to $2,750.
Mass-market brands such as Ford or Chevrolet or Toyota aren't close to the point where they can keep just a few cars and trucks in stock and compel a large share of customers to special order cars. But they're doing a better job of holding the line on overproduction than they did before the downturn especially with pickups and crossovers, which have been selling well despite the slow upward creep in gas prices.
General Motors Co. has at least one car that's in ridiculously short supply: the $40,000 Chevy Volt plug-in hybrid. As of Nov. 30, GM had just eight of them in stock. Take a number.