Important Guidance on 2021 Acquisition Planning
January 4, 2021
In my October 2020 acquisition planning update, I focused on the assembly plant shutdowns this past summer and the impact to vehicle inventory and fleet allocation. Since October, we have seen auto sales continue to rebound and as a result, OEMs are filling up their order banks months earlier than they normally would. We see this trend with both domestic and import branded OEMs.
Moving into 2021, we’re recommending that any orders that are planned for the spring order cycle be pulled forward and placed in January or February to ensure they are accepted as MY21 orders.
Below are just a few reasons to order early:
Early Order Cut-Offs and COVID-19
We’re seeing further COVID-19 impact as MY21 order cut-offs are announced earlier than usual — across many models. I’m expecting this trend to continue and believe it will be more difficult than ever to plan for vehicle replacements this winter and spring. I want to stress the importance of placing any remaining orders sooner, rather than later, to ensure they are placed ahead of order cut-off.
In conversations with our OEM partners they, too, stressed the importance of ordering early. We have already received notification of order cut-offs for several models from December through February, where these cut-offs dates would normally be three months later, from March through May.
Short Notice Fleet Vehicle Cut-Off Deadlines
It’s important to note that the published cut-off dates can always be moved forward on extremely short notice. For example, General Motors received an abundance of orders in December and reached allocation. This required them to close their order period for a variety of trucks and vans, with only 48 hours’ notice.
On models for which cut-off dates have not been published, the actual cut-off dates are unpredictable, although still expected to be earlier than in previous years.
Extended Order-to-Delivery Fleet Vehicle Timelines
Order-to-delivery lead times are longer than typical years and may extend further. This means that we need to plan on a longer lead time from order placement to delivery. In other words, spring production at the OEMs will still happen in the spring, but it will simply be spoken for a lot earlier than it would otherwise be.
Typically, we see the new model year vehicles start production after the summer holidays with deliveries in late summer or early fall. If you miss placing orders this spring and wait for MY22 vehicles, you may not take delivery until Fall of 2021.
Less out-of-stock inventory
Normally if orders need to be placed after the factory order cut-off date, we look to dealers’ stock to fill these urgent client needs. Currently, vehicle inventory is at historically low levels. Sourcing vehicles from dealer stock will be extremely challenging, and we anticipate pricing to be higher than normal.
High residual value
Now is a good time to order early and take advantage of the low inventory and high demand situation, keeping residual values high. The resale market will remain strong while new vehicle inventory at dealers is limited. At some point, production will catch up with demand, bringing resale values back into line.
As an organization, we’ll be making a strong push to reach out to each of our customers to align on this topic. If you have questions, please reach out to your Wheels Account Team.