Vehicle allocation just one of many dealer-manufacturer conflicts

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Car dealership

Part of the behind-the-scenes action between dealers and auto makers is vehicle allocation, which most people don't realize has a lot to do with the cars they get to buy. Image from Wikimedia Commons.

The end consumer of just about anything rarely has any inkling about how anything gets to the point of purchase, including cars. Part of the process is a surprising number of struggles between manufacturers and dealers, among them being dealer vehicle allocation and other things.

Vehicle allocation is the reason the dealer doesn’t have the trim one wants

Ever see a car you want to buy, research it and find a trim level you like, only to find no dealership near you has one? There’s a reason for that. It’s called vehicle allocation, or dealer vehicle allocation, and it is one of the many struggles between manufacturer and car dealerships, according to Car and Driver.

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What many people don’t get about most products they buy is that a long chain of events has to transpire before they buy whatever widget it is they want. Food in grocery stores, lumber in hardware stores, etc., go from being raw materials to being made, prepared and shipped to wherever its being bought.

Super size it

Dealerships are franchises of a particular manufacturer. Just like the local McDonald’s is owned and operated by a private corporation or person, dealerships likewise are car lots owned by a party that has an agreement to sell cars from one manufacturer, or several in some cases.

What stock they get is determined vehicle allocation; dealerships get a certain number of cars, with a certain number of each trim level and option and so forth, for each model. Sometimes, dealers aren’t quite so keen on what they get.

For instance, according to The Truth About Cars, Chevrolet dealers were refusing to take the Volt earlier this year because of the model’s abysmally slow sales. Dealers lose money when a car sits. If customers don’t want to get a car loan for that model, the dealer will only accept it begrudgingly, hence the reason some Ferrari dealers, according to Car and Driver, aren’t happy about getting the FF, which doesn’t sell nearly as well as the 458 Italia.

Image is everything

Some brands, often the more exclusive ones, also mandate what the dealership itself must look like. Mercedes-Benz and other luxury brands are forcing some dealerships to remodel if not totally rebuild their businesses to the image “corporate” wants them to, which can cost millions. If a Seattle, Hunstville or Houston BMW dealership looks different lately, that’s likely the reason. If they aren’t up to code, the vehicle allocation is likely to drop as punishment.

The turn and earn

Part of vehicle allocation, according to a blog post by the Kellogg School of Management at Northwestern University, is tied to how many vehicles a dealership sells. It’s called “turn-and-earn;” if a dealer moves a lot of cars, they get a bigger shipment next time to potentially bring in even more cash from sales.

A companion to that is that the number of the hot, new models is often tied to how many of another car a dealer sells. For instance, according to AutoBlog, Dodge allegedly has told dealers that the number of the outgoing Caliber models they sell will determine how many Dart units they get.


Car and Driver

The Truth About Cars

Kellogg School of Management


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