Heard the following story from a manager at a car dealership:

When they buy cars, they have a certain time period to sell them otherwise they start getting charged fees by the parent company (who makes the cars).

So taking a bunch of inventory is a risk.
1/

When covid hit, nobody really knew what would happen so the vast majority of the dealerships cut their orders back by a lot (not wanting to get caught holding a lot of stock & the associated carry cost of that inventory).

This particular dealership didn't.
2/

They took a more bullish stance and figured they'd be able to move the cars, so they upped their order and are now slaying it.

Remember that tweet about the dealership trying to charge me above MSRP because the car was 'rare'?

Well it probably was. Like, for them.
3/

Because they were one of the ones that didn't take the risk.

In fact it sounds like most of them didn't.

The dealership we eventually bought from (*not* over MSRP [btch, pls]) was a contrarian shop - one of the who upped their order, and told me this story.
4/

This all seems pretty fascinating to me.

There's a perception right now that cars are selling like hotcakes - and perhaps they are, what with things being closed for a bit.

But also: there's a massive supply lag here too, just due to the incentives at play.
5/

Now - is this unique to the car industry?

Well... the specifics seem like they might be, yes, but also: every market system will have some method of accounting for the opportunity cost of warehousing unsold stock.

So my sense is that it's a generalizable example.
6/

And what do you suppose those formerly risk-averse dealerships are doing now that they're seeing more demand than they've got supply for?

Bet they're ordering like crazy.

And that's what we're seeing in the ISM.

Gonna be an interesting year or so as things even out.
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