Continuing to Diligently Request Allocation of Vehicles

By: Micah A. Andrews & Jason T. Allen

As dealers are well aware, there has been limited product availability across almost the entire automotive industry for multiple years. Production setbacks have been a constant theme for almost every OEM resulting in significantly low levels of inventory being allocated to dealers. Unfortunately, the production delays are unlikely to lift in the immediate future as OEMs continue to experience shortages and supply constraints. For example, this summer GM CEO Mary Barra acknowledged during an interview with CNBC that GM was still dealing with various production delays and expects the current chip shortage and supply chain challenges to persist well into 2023. While some issues have been resolved, she acknowledged that new issues have arisen on an almost weekly basis.

Despite these continued inventory constraints, OEMs have continued their pre-pandemic practices of issuing warnings to dealers of their failures to reach sales performance expectations. Given that new vehicle sales for nearly every dealer in the current sales market have been limited only by the number of vehicles they are allocated, these OEM communications appear disconnected to reality. Nevertheless, a dealer should be wise that OEMs will later use these written communications down the road if they are advantageous to the OEM. Given this, while it may seem like a fruitless endeavor, it is now as important as ever for dealers to diligently voice their need and desire for vehicle allocation from their OEM. A written record of a dealership voicing its allocation needs and the inability of the OEM to meet that need will undercut any later attempt by the OEM to suggest a dealer is underperforming.

Additionally, a dealer’s methodical requesting of vehicle allocation it needs to serve its market may also be filled in some instances (the squeaky wheel gets the oil). The value of even one additional unit for a dealership is at an all-time high in the current market. To this end, dealers should continue to stress their need for more vehicles on a regular basis, including from the OEMs discretionary allocation. Dealers should circle back to insure they understand and are correctly using their OEMs ordering process. Also, in the same way that OEM representatives are careful to document their warnings to a dealer in writing, dealers should do the same by documenting specific model types and vehicle needs in writing (or in a memorializing email after a phone discussion).

In conclusion, even in times where additional allocation requests feel like a waste of time, dealers are wise to double their efforts in these regards. Questions about allocation concerns or questions as to how to appropriately communicate these concerns to the OEM should be directed to your dealer lawyer.