How deep in your pipeline are you selling?
Right now, my F-status vehicles, or vehicles with freight status — vehicles coming to me — are 95 percent of them sold out, and they’ll all probably be sold out within a day because they keep coming. And we’re selling well what we also call A-status or allocated status. Toyota has cut things short, so they’re speeding us up vehicles a little bit, and every dealership is handling this situation a little differently. There’s really no blueprint for doing this. We are a small organization and have been able to manage things really closely, so I am taking sold orders at a very high clip and underpromising and overdelivering with customers knowing that there are some products that Those that I can turn into an allocation system and do that, so we’re doing a great job.
Our customers are really excited by the fact that we communicate with them so well. They are ready to wait for the right car and we are handling it. So it’s an interesting environment. We are kind of thriving in it. I think you will be amazed. I think a lot of dealerships are thriving. I know there are some that are definitely struggling, but I think many, many dealerships are thriving in this environment.
How do you explain to customers who have spent decades buying dealer stock that they will probably have to wait a few months, or order their own vehicle?
So you have two concepts. Yes, we’re going to ask you to wait four months, and yes, we’re going to ask you to pay something you never thought was fair: MSRP, suggested retail price, and it’s fair. I think the thing is, COVID has done this to customers in every industry.
Are customers willing to wait for vehicles?
You know, if you go to buy a refrigerator, there’s a very, very good chance that it will take six to nine months to get a refrigerator today. They see restaurants that are half empty, but customers are waiting because there aren’t enough servers to help them. So we deal with a very educated consumer, and I think across the board, Toyota has a more educated consumer. They understand the environment we’re in, so people say they’re willing to wait four months, and they’ll tell us their top three colors or their top three trim options. They’re just offering some flexibility, one way or another. And if we get one of these options, we can usually make them happy.
Toyota had some very dramatic lineup changes over the past year: the addition of a redesigned Tundra, Corolla Cross, now a redesigned Sequoia, the elimination of the Avalon. What do those changes mean for your customers?
Well, I think the Tundra has to be the volume piece when we’re talking about America. We know that the number 1 selling vehicle every year and every year is a pickup truck, right? So this is a segment that Toyota is really quite committed to. I know they may be slow on things for a few years, but with the introduction of this new Tundra, they’re all-in, back in.
Outside of supply chain issues, they’re knocking on double the door for double the commitment they’re going to give us — we’re getting twice the trucks we can sell. I’m in that part of the country that is truck country, here in the Upper Midwest. I think Toyota, its dealers — particularly in the Midwest, Texas and across the country — I think we’re really excited about Tundra and Sequoia because they are products that are Midwest products. We sell a lot of Corollas and Camrys and the like, but I’ll tell you this sounds a bit more like a Southern California product. And it looks like now that Toyota has moved to Texas, suddenly we’re getting a lot of Midwest products.
Listen, everyone’s pretty excited about Sequoia, too; That thing sounds unbelievable. And I’ve had the privilege of seeing it in person, and it’s fantastic. But I think we got excited about Tundra because we’re seeing the numbers that we’re seeing and the people who want it and the demographic that we’re serving there. This is really good for the brand.
If and when the chip shortage ends, what practices need to be sustained over the last 24 months?
I think there’s definitely an inventory and a supply piece to it that manufacturers and dealerships alike have learned from. And I think it really needs something of the sort to align people on the same page. There is an exact number of cars to sit on the lot, there is inventory for dealers, and there is an exact number of inventory that make up a demand and one-of-a-kind value statement for an automaker.
I think automakers have realized that throwing out too many cars is no way, and I think they’re learning a lot; As many dealers as there are manufacturers, manufacturers have learned a lot about incentives. We don’t have access to all those budgets, but I’ll bet his No. 1 marketing spend was an incentive game. And maybe there’s some incentive, and I think that’s great for the customer. But let’s move on to the actual transaction prices. Let us live in what I would consider a true supply-demand equilibrium. That’s economics 101. This makes sense and keeps out some of these additional forces manipulating the market. I think it’s great for the customers, it’s great for us and for the manufacturers.
What practices would you like to fix during the pandemic?
I think the biggest thing that we want to do, and I was working really hard on it, is have a lot of transparency on the logistics, so that we can tell customers that when we’re talking to them there’s a vehicle here. When will that happen, because things change so quickly. I don’t care if it’s a railhead that doesn’t have employees because of COVID, or it’s a supplier that can’t supply a line stopping part, or all the different things that go with it. It would be great to have some transparency so that we can tell a customer that their vehicle was going to be here in two weeks or 10 days or four months, but be able to update them if something changes. What we have found during this period is that customers are incredibly patient if you are honest and transparent and can keep them informed. And we need to do it better.
So what kind of cars come in — and we have visibility on all of these things, but it’s amazing how jumpy it gets. So I think the number 1 thing that we’ll get, and it’s strictly a supply chain thing, and it’s easy to take care of, but we’ll be able to tell people who are willing to wait when clearly their car is finally Will come If we can do that, and provide that kind of visibility, that will help us get rid of the fragility in the logistics pipeline.
How are Toyota dealers preparing for the bZ4X and later EVs?
I’m probably not quite as in tune with the whole electrification thing as our dealers on the beaches. The infrastructure for fully electric vehicles isn’t here in Iowa. but in those states [with ZEV mandates]Toyota is going to be where they need to be. They are incredible when it comes to doing what they need to do to meet those mandates and those requirements.
As dealers, electrification affects each of us differently depending on our market. The dealership needs to do some infrastructure. We understand it. I don’t think there is any dealer in America who doesn’t believe that their business is changing and changing for the better as we electrify things. But we have a business partner at Toyota who started the electrification movement. So we know we are on the right team in that world.
We want to take the common sense approach on electrification, and at Council, there has never been a dealer in the room who said no, we don’t want to take the common sense approach.
Toyota CEO Akio Toyoda stands in front of a palette of futuristic products in December. What did you see in that future showroom that should get dealers most excited?
The entire market will be flooded with electric vehicles in a very short time, if you read about what’s coming. I think we’re all really excited to see where it really is in the next five years, and where it goes after five years and beyond. We all know that what customers want is going to evolve into what they want. We cannot take the top 5 percent of car buyers and expect the entire industry to change, because it will not work that way. And that’s what we’re advertising for and what we’re staring at, that small margin of customers, and we need to worry about the other 70 percent. We obviously need to bring the carbon footprint of these vehicles down from an environmental standpoint, but I’m a lot more excited by the electrified Tundra, because that’s where the volume is.
What pressure do Toyota dealers feel from Tesla and the way it does business with its customers?
This is a great point. 1 in terms of US sales last year, and great year for dealers, you don’t see them beating that drum, do you? Instead, you see them talking over and over again about the customer experience, about improving customer interaction and what we can do to create more customers. That’s how they’ve evolved so organically over the years in America, and it’s embedded in the culture. And when you talk about Tesla, first is their product, but then, there’s also their customer experience, and that doesn’t sound very good to me. It seems short-sighted.
I know Toyota nationally, their commitment to the dealer body is simply outstanding; Above and beyond any other manufacturer right now, they’re talking about how we need to create guest experiences and customer experiences that are world class. They will always build the quality of cars that they are going to be. If we want to build a world class car, we need to have a world class shopping and ownership experience. That whole enchilada is right there. And so I think that’s what we’re really focused on.