Infiniti: Light on inventory, so focus on service

It's been a rough start to the decade for Infiniti dealers who are starving for new product. That drought will extend into the new year.

The Japanese luxury brand's last major product — the redesigned QX60 midsize crossover — was delayed several months, rolling into stores in late 2021. The next significant model — the redesigned full-size QX80 crossover — is more than a year out.

Infiniti won't have an all-new model until at least 2025, when production begins in Canton, Miss., on its first battery-powered vehicle.

The absence of fresh vehicles is top of mind for Steve Lapin, Infiniti National Dealer Advisory Board chairman.

"Product is king," Lapin, 73, told Automotive News. "There's not one Infiniti dealer in the country that's not disappointed about not having more product."

The CEO of Achievement Automotive, which operates an Infiniti store in Thousand Oaks, Calif., is also frustrated by a lack of visibility into Infiniti's product road map.

"They keep everything close to the vest," Lapin said.

So, how are Infiniti dealers to plan in the information vacuum?

Lapin responded with a shrug: "This is the hand we are dealt.

"We know how to market what we have, and we do a good job with used cars," he said. "That's how we survive until we get more product."

Without new products to lure buyers into showrooms, Infiniti dealers must focus on customer service.

"Service retention is what we live on," Lapin said.

Lapin spoke with Staff Reporter Urvaksh Karkaria about the products, challenges and opportunities Infiniti dealers should expect in 2023. Here are edited excerpts.

Q: What are the top issues on the dealer board's agenda in 2023?

A: The No. 1 challenge for Infiniti is the need for more depth and breadth in the product portfolio. We must be in more segments.

The dealer board is disappointed that we don't have an electric model on the market. We don't need a slew of them; we need one to show people.

Sustaining dealer profitability as interest rates rise is also front of mind for the dealer board. Dealerships are profitable due to the inventory crunch, but we don't want to see that regress. We will fight for profitability — through better manufacturer incentives or by managing expenses better.

Dealer profitability also hinges on managing vehicle supply. The cadence of delivering cars is critical. If you keep supply at the right level, you control profitability. But if you flood the market, that's when bad things happen.

How was the inventory situation last year, and how are dealers managing?

We are preselling allocations while they are inbound. We've become dependent on taking orders and deposits from customers and ensuring their deliveries.

Days' supply was in the 30-day range in late 2022, compared with 10- to 12-days' supply at the beginning of last year. At one point, I had six cars on the lot.

Inventory is improving, but there are still chinks in the supply chain.

Dealers never want too much product. If it's too little, that's OK as long as it's not choking you. I would prefer less than more because that keeps the profit margin higher.

Any concerns that Infiniti will return to pushing volume when supply ramps up and competitors chase market share?

Infiniti has held the line on putting sales incentives on vehicles because it hasn't needed to, with demand outstripping supply.

But Infiniti has learned that getting into a market share war hasn't helped; it's hurt them.

Infiniti has said it wouldn't jam inventory on dealers or sell heavily into fleets. We hope they stay disciplined on that. Profitability is paramount.

Infiniti says it wants to keep inventories at no more than a 40- to 45-day level. That would be good for the franchise because it would reduce the need for discounting and prop up residual values.

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

The market is volatile. CPO has become a more critical part of our strategy. We are reaching out to every avenue we can to get cars.

What is Infiniti's plan to promote leasing in 2023?

The plan is to grow the share of leasing. Lease penetration is 20 percent to 25 percent. We'd like to see it closer to 50 percent.

Leasing helps with vehicle affordability. It creates repeat customers and is a source of well-maintained used cars.

The dealer board has told Infiniti it must build a higher take rate on leases for 2023. And we have left it to them to come up with a plan.

Has the inventory shortage reinforced the viability of the one-price, no-haggle selling model?

The one-price model eliminates haggling, which is so damaging to consumer perception of the car-buying process.

For the dealer, it could lower margins a little bit. But in the long run, if it were one-price everywhere, it would then be about which dealership takes better care of their customers.

What is Infiniti telling dealers about new-vehicle price markups?

Like other automakers, Infiniti doesn't like its dealers marking up prices. For the most part, inventory dictates that. There aren't big markups anymore.

What is Infiniti doing to help dealers grow fixed operations?

Little things like buying tires and batteries are significant issues driving customers away from the dealership. So we have initiatives on tires, and the manufacturer works very hard to get us excellent pricing for customers. The aim is to stop customers from going to independent repair places.

Unlike some luxury brands committed to going all-electric, Infiniti will continue to offer combustion engine models. Do you agree with that strategy?

I'm all for combustion engine vehicles remaining in the portfolio because I wonder if full electrification is the answer. You'll only see EVs account for about 15 percent of total cars sold.

Maintaining combustion engine models in the lineup helps the brand with affordability. The cost of battery raw materials — lithium and cobalt — keeps going up, which means electric car prices will increase faster than gasoline-powered vehicles.

ICE models will comprise more than 50 percent of Infiniti's product portfolio for the next five years. But long term, federal and state environmental regulations will help determine the powertrain mix. California is talking about going EV-only by 2030.

Should sedans remain in Infiniti's lineup?

Infiniti would be making a huge mistake moving away from sedans.

Sedans offer exposure to a broader range of customer segments and continue to sell well for other brands. We should never become Range Rover and focus exclusively on SUVs.

What new products are dealers excited about?

The redesigned QX80 crossover will arrive in 2024. It incorporates the good features of every big SUV out there.

Infiniti did a phenomenal job with technology and engineering.

A two-row crossover based on the QX60 is expected in 2026 to compete with the Lexus RX and Mercedes GLE. Why is that a key addition to the U.S. lineup?

The vehicle will give us exposure to a high-volume market segment. Lexus sold more than 100,000 RX crossovers last year. Many families don't need the third row. They'd rather have storage space.

What's missing from the lineup?

If we're going to become this aspirational brand, we would need a six-figure GT-R-type car. It would be a showpiece of Infiniti's engineering capabilities.

An entry-priced model in the $35,000 to $40,000 range would bring young families into the brand, who will upgrade to the larger QX60 and QX80 models as their incomes and families grow.

Infiniti is slow to the EV game. Are you concerned it could lose even more market share while the luxe segment goes all-in?

Would I rather have the EV product sooner? Of course. But Infiniti is slow-walking it into the EV market, waiting to see what happens with EV adoption in the U.S..

Infiniti will continue learning and developing products that meet buyers' needs. Nissan is a pioneer in electric cars; it's not like they don't know how to build them. By the time we get our first EV in 2025, it will be very competitive.

How will electric vehicles affect dealer margins?

It's unknown. I'm hoping that by the time we get the first electric vehicles, the technology will have advanced, and development costs will have come down enough that Infiniti won't need to cut into our margins to sell the vehicles profitably.

Lately, Nissan Motor Co. has prioritized the Nissan brand when debuting technology and vehicle platforms. Is that misguided, given that Infiniti is the group's premium brand?

Infiniti vehicles should have cutting-edge technologies as the luxury division. It enhances brand value and helps justify the price premium.

Initially, Infiniti dealers were disappointed that the Nissan Pathfinder launched before the QX60. But with the quality issues that affected the vehicles' shared platform, having the QX60 come later worked out much better for us.