Monday, February 4, 2013

California Volt Inventory Makes or Breaks Sales...

Prognosticating Volt sales has been a hobby of mine since February 2012.  I've gotten fairly good at it.  But I have also gotten it wrong a few times, most recently with the sales numbers for the last three months of the year.  In this post, I analyze why I got it wrong, and what were the causes.  In short, my loftly sales expectations were artificially deflated through a lack of inventory in key markets.  Those goals would likely have been met had there not been extreme inventory losses in the California market.

With August sales nearing 3,000,  I thought the Volt had finally made it over the hump.  I expected progressively larger monthly sales through December, possibly breaking the 4,000 mark.  With that said, I did expect a big drop in January 2013.  With the Volt carrying a hefty tax credit of $7,500, I expected people would be more willing to buy a volt near the end of a tax season rather than at the beginning of a new one.  Why wait over a year for $7,500 if you don't have to? 

I was right to a point. Sales from August to October slowly rose to almost 3,000.  But then the monthly sales streak that had been going on since April 2012 came to an end.  November Volt sales plummeted to almost half the previous month.  There has been no discernable momentum since, with a bounce back December immediately followed by a depressed January.

Why the dive?  It wasn't demand.  It wasn't that all of a sudden the Volt became unattractive.  It wasn't the easing of promotions, although GM did get less aggressive after August. 

The big reason behind the bipolar volatility of Volt sales is a enormous lack of inventory in key markets. 

When the California market is under stocked, Volt sales are going to struggle.  With California Volt sales purportedly 50% of the nationwide total, GM has gotten way behind the eight ball in supplying this critical market.  And complicating matters are California's emissions laws.  If someone wants a Volt that isn't local, its not as simple as getting one across state lines.  That Volt must be equipped for California emissions if HOV access is important to you (California requires the emissions package to be eligible for HOV single car occupancy).

Let's take a look at inventory levels in the 30 mile radius of the 90210 zip code.  Why look at 90210?  I have been checking inventory levels for this zip code since back in May of 2012 from data provided by cars.com, and given that it is likely the Volt's single largest market, it should provide a good illustration of the problem.

 
 
As you can see, the changes in inventory from May of last year to January of 2013 are pretty enormous.  I don't think this graph is indicative of the inventory levels you would expect to see in a well-supplied growth product like the Volt.

In overlaying the nationwide sales numbers to the 90210 inventory graph, we can start to see how this inventory model is a problem.

The first shaded area I am going to call the "Volt Sales Growth Period".  The green line, indicating monthly Volt sales, is on a fairly sharp slope through August 2012.  Inventory in the 90210 area code is also sharply increasing through August (please note that I have scaled inventory by 10 in order to keep the orders of magnitude similar in the graphs- use the upper graph for actual numbers, and take note their are tiny differences between the two which are the result of rounding some numbers, and not others). 




The next period I am going to call the "Volt Sales Constrained Period".  Since Volt sales are so heavily dependent on California, any disruptions to either maintaining or increasing inventory is going to have an effect on sales.  While sales marginally increased from August through October, you can see downward trending 90210 inventory pulling back the reigns.  Available California inventory was able to maintain but not grow sales beyond 3,000. The quarterly growth rate we've seen since the first quarter of 2012 start to decline.


 


Then General Motors, for better or worse, takes a bad situation and makes it much worse.

From September 17, 2012 through October 15, 2012 GM shuts down the Volt plant for retooling and to add a new car line. 

This created the perfect storm. 

Los Angeles inventory is already very low, barely able to sustain the demand.  A month long shutdown will cause a full 30 day disruption to the supply chain for California.  While GM ramped up production prior to the shutdown in order to stockpile Volts, it wasn't enough.

And now we enter the "Volt Sales Destruction Period". 

When the plant reopened on October 15, it would take 4-6 weeks to start seeing some inventory gains in the Los Angeles area.  And as soon as we start to get a little inventory added back into the market in late November, during a period of the year where this car should have its maximum inventory, the plant gets shutdown AGAIN for most of the month of December for the holidays.  There definitely were some buyers of the Volt in December, obviously looking to take advantage of the tax credit, but imagine how much better that number would have been had the L.A. inventory been at higher levels.

And then we got the expected January drop.  With inventory levels at year lows in January 2013, is there any wonder why GM only sold 1,140 Volts last month?  I expected a dip, but this dip was far worse than it needed to be.





General Motors need only look at the decisions it has made in not maintaining proper inventory levels in key markets to see why Volt sales havent been able to reach and maintain that magical 3,000 sales a month mark.

To end on a positive note, there is FINALLY a large surge in Volt inventory coming into California.  If history is an indicator, we should see February 2013 sales numbers up considerably from January 2013 as long as this increase continues.

Additional graph of nationwide inventory levels as an FYI:

3 comments:

  1. One more factor impacting the sales that I think was as significant as the inventory level was the weather, the extremely cold temperatures, even in CA, and the snow. Last year we didn't have such a severe weather January, but we did have the aftermath of the NHTSA battery fiasco.

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