Quote:
Originally Posted by KMPrenger
Naa. I can't get on board with that.
Are sales (any sale?) good? Well yes...at least as long as there is some sort of profit involved under normal circumstance.
But again, profit is king.
Why GM would want to keep fleet sales to a low number....I don't know. That should be just extra profit on top of their more profitable retail sales. Maybe its simply b/c it lowers the over % of profit they can claim they make on their vehicles. I don't know the reason. But 2,500 fleet sales does not equal 2,500 retail sales in my book. In no way do I think fleet sales are evil. I just consider retail sales as the better sale.
In terms of exposure....well then yes, the more sales the better no matter how you can get them.
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I totally get what your saying. But as long your selling something at a profit, a sale is a sale. Would you rather have more higher profit sales of course but sitting on unsold inventory isn't a recipe for success either.
I agree 2500 fleet sales is not 2500 retail sales. The secret is when they are mixed together. it's about finding the right balance.
Quote:
Originally Posted by DGthe3
Rental sales are bad in 3 ways.
Rental companies tend to buy cars that are cheap with and with few, if any, extra options. This means they are low margin to begin with.
Next, fleet sales are normally discounted even more than whatever incentives you happen to find at the dealers lot (buy in bulk to save!), driving down profit margins even further
Lastly, this is one that concerns owners & dealers more than the manufacturer. Rental cars pull down the average resale value of cars sold via retail. So even when a customer comes back a few years later, that person gets less on their trade in and the dealer makes less on reselling the used car. Similarly, it also drives up the cost of leasing because of the higher depreciation rate.
Selling cars to rental fleets is a way to keep the factory turning out cars. But thats about it. Saying a sale is a sale is like saying a job is a job -you're getting paid. So what if its a part time job paying minimum wage? Thats the same as getting a $65k a year salary in an office somewhere, right?
Also, the idea that the tooling is 'paid off' on old cars is BS to me. Development costs and tooling are one time deals. You pay for it before you start building, with money you made from selling other cars. Not by transferring any and all profits from a new car sold into the 'tooling debt' for each individual model, until such time as the tooling is paid for and then you get to pocket the money as profit. I mean, does that not sound insane if you are a century old automaker that has to buy multiple sets of tooling each and every year and have a revenue of many, many, billions of dollars to do it with?
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I disagree a bit with your job analogy. In the case of the fleet sale debate, because it's always a mix of both retail and fleet. If it was 100% fleet I would have to agree with you it's not the same.
Now maybe my view is a bit skewed based on personal experiences, but in my line of work, idle time and excessive inventory can kill the bottom line.
Like I always say its about finding the right balance that works.