Buick-GMC: Strong demand and improving inventory

Inventory levels were improving for Buick-GMC dealers as 2022 ended, and dealer Bo Mandal expects supply will be even better this year.

That's a good thing, considering both General Motors brands are preparing for the rollout of new products, including the GMC Hummer electric SUV and a redesigned GMC Canyon midsize pickup, said Mandal, CEO of Mandal Automotive Group in Biloxi, Miss., who has one Buick-GMC store.

Demand remains strong for Buick and GMC vehicles, said Mandal, who is chairman of the Buick-GMC National Dealer Council. Dealers have been able to adapt to changing market conditions through the pandemic and the semiconductor shortage, he said, learning that they can sell vehicles when they are plenty and when they are few.

Mandal, 46, spoke with Staff Reporter Lindsay VanHulle in December about Buick-GMC's inventory levels, preparations for the shift to selling electric vehicles, vehicle affordability concerns, and used-vehicle sales and acquisition strategies heading into 2023. Here are edited excerpts.

Q: How close are Buick-GMC's production and inventory levels to coming back in line with demand? What do dealers expect in terms of inventory and days' supply in 2023?

A: Days' supply and inventory is certainly going to be better in '23. We've already seen that it's better in the fourth quarter. I don't expect we'll ever return to these enormous days' supply numbers, and I don't expect we'll ever return to these enormously low days' supply numbers. I think the sweet spot is probably somewhere between 30 and 40 days. But having said that, we also just have learned to expect the unexpected. So there's been challenges, but we've overcome and adapted.

How are Buick-GMC dealers coping with the inventory constraints?

I think we've simplified the ordering process. There's less options when you're building a truck, or you're building a Buick. Over the course of the last year, we've really tried to simplify ordering. Don't get me wrong, there's still plenty of ways to build any one of these models out there, but we've done a much better job. That's one of the things that have come out of the last three years, and we've all worked together.

How are rising interest rates affecting the sale and financing of new or used vehicles at Buick-GMC dealerships?

So far, Buick and GMC sales are still strong. Even here we are mid-December, people are talking about us being in a future recession. But for these specific brands, , they're still pretty strong. There's still an appetite for this product.

You've got a lot of new products coming online with Buick and GMC that people are excited about. So when you build a premium product, and it's really, really good in its class, you can overcome adversity in the marketplace with high interest rates and so on and so forth. It's the product that you have to push that can stack up on you, and right now, these brands don't have any of that product.

How are Buick-GMC dealerships performing from a profitability standpoint?

I think the last few years, every Buick-GMC dealer has been successful in profitability. I think that if you look at the stats that NADA puts out that it's been a great year for everybody in the automotive industry — not just automobile dealers, but also manufacturers, and I think it's been across all OEMs as well. It's been a supply-and-demand thing, of course, like everything else. I think the good news is because we've been able to put so many new best practices together, we'll continue profitability moving forward in '23, '24 and years to come.

How sustainable are current vehicle margins and profitability as inventory levels improve?

I think that's yet to be determined.

But our outlook is to make sure that we continue to create strong, sustainable dealer profitability results. Does that mean they're going to be as good as they were in '21 and '22? I don't think anybody's naive to believe that that's sustainable, but certainly dealer profitability's going to continue to be better than it was, say, in '17, '18, '19 and part of '20. So it's probably a happy medium.

Are current used-car market conditions causing dealers to revise the strategies they put in place in 2021 for acquiring and selling used cars?

I don't know that it's revising your strategy as much as it is adapting to the market.

When the market moves, you move with the market. So, I think that the used-car business has an opportunity as prices begin to settle. We are all obviously seeing that happen right now.

Used-car business is a week-by-week business. In some cases, it's day by day. But Buick-GMC dealers as a whole seem to be able to navigate through that much, much leaner and with much more precision to be able to move with the market.

If dealers reduced their reliance on wholesale auctions last year in favor of other acquisition channels, are they now turning back to auctions in search of cheaper inventory?

Buick and GMC dealers were very creative over the last couple years in sourcing preowned vehicles, whether it be in your service drive, whether it be off the street, whether it be in campaigns. But I will also say that we're entering a climate today — especially, say in the last even 30 days — where we're able to purchase some off-lease vehicles from GM Financial, we're able to purchase some vehicles from auction. So yes, to answer your question, dealers are going back and purchasing products again through auctions, which I think is also good for the economy. It's also a good sign that the used-car market is sort of finding its place and it's kind of where it needs to be almost.

Will dealers keep the new sourcing channels going forward?

I think it's going to be part of the playbook going forward, as well. Again, through the pandemic, we've learned so much about our own business, and we've created new business models. And I think that's just another tool in the tool belt that we've learned how to all become much better at. When a guest needs to sell a used car, we're available to buy it.

Is Buick-GMC adequately advising and providing resources for its dealers on how to prepare for the rollout of electric vehicles?

Oh, absolutely, yeah. You've got your EV training program that everybody goes through, which is wonderful. Dealers are really kind of choosing to make one or two people in their dealership champion that, and those people that are championing that effort are kind of who handle all the training inside the stores as it relates to future EV product.

Has Buick-GMC imposed new requirements or sales standards related to selling EVs now or in the future?

They haven't. There's been no sales standards or facility upgrade talked about at this point in time. This was probably the most interesting topic that people want to ask me about all the time, and it's really so benign, it's incredible, believe it or not. If you're a Buick dealer, if you want to go into the all-EV future, great. Wonderful, we want you to go with us. Or if you don't, great, fine, no problem, we'll give you a buyout. It's literally that simple. And our council was 100 percent behind it — if it was a dealer's choice. So the whole conversation was only going to happen if it was a dealer's choice. So we just said, "Well, there's no harm, no foul here. If you want to be a Buick dealer for the next 100 years, be a Buick dealer for the next 100 years. If you don't, no problem."

What is Buick-GMC signaling to dealers about its position on direct sales or having more control in the consumer transaction?

They've got no interest. The one thing I love about General Motors, what they believe is that their dealers — all of their dealers — are a strategic advantage for them to go to market, whether it be ICE or EV. I mean, think about it: There's 4,000 brick-and-mortar signs and locations across America on every corner. It's a clear advantage. You can pop into any one of these places and look or buy an EV.

They're disrupting by being the leader with Ultium and the things that they're doing. But it's clear to us as dealers that they're absolutely only going to do it with their dealer body group. I know some other OEMs have said different things, but that could not be further from the truth than the way GM feels about their strategic partnership with their dealer network.

What is Buick-GMC's position on subscription services for capabilities built into the vehicle or that can be enabled using software after purchase?

I think that's in development stages. I think that we don't really know where that's going to land. I think there's a lot of research going on, a lot of development going on, a lot of things behind the scenes going on just from a product standpoint.

What do our customers want? What do they not want? I will say this, though: If we move into that space, it will be with the dealers.

What do dealers think the dealership's role should be?

It's really a two-part question: How do they think they ought to be part of that process, and how will they be part of that process. Dealers believe that we should be part of that process, especially if we're delivering the vehicle. And the second part of that question is, so does General Motors.

GM believes that we are absolutely part of whatever that revenue is, and subscription base is, moving forward. It's a long way from development, of course, but they've been very transparent with us, saying, "Hey, this is going to be a big part of what you guys do, as well."

What is Buick-GMC doing to promote sales of used vehicles, including its certified used-vehicle program? How are dealers reacting to the CarBravo online sales platform for used vehicles?

One thing I love about CarBravo is it's dealer choice. You either want to participate in it and you believe in the product, or you don't and you don't have to. If you want used cars to be the way you've done it your whole life because it works great for you, fine. If you do want to do CarBravo and you believe it gives you in your market a competitive advantage, fine, there's another tool in the tool belt for you to use.

That's what separates GM from a lot of other OEMs. When you bring up a program like CarBravo, people might roll this out and say, "Hey, if you want to be a dealer, this is the way it has to be." GM doesn't do that. They say, "Hey, we're putting this tool together. We think it's going to be an awesome experience."

First, nobody's ever come out with a product or an experience or a used-car program that would allow a GM dealer to certify every OEM's brand in their used cars. What a huge advantage, if you believe it is. What a great network and system to have, if you're that guy. If you're not that guy or gal, fine, just do what you want to do.

After an industrywide decline in leasing, what is Buick-GMC's plan to promote leasing in 2023?

I think the leasing programs are going to get much better in the first quarter. I think leasing's going to come back and become a viable part of our business, and I think leasing's going to be a strategic part of our business.

What's missing in the product lineup?

We've got a lot of stuff missing that's not here yet, but you know it's coming. Nothing's really missing. We're going to have a premium truck brand — EV trucks, Sierra EV. We've got the Hummer, which is going to be really, really cool. The new Canyon's coming out. Buick's got some new product coming, more to talk about with that later.

The product is right where it needs to be. It really is. It's the best we've ever had.