Toyota salesman Mitch Schechter made good money selling Prius hybrids in March, but he stands to make a killing in April.
The Prius is one of several models that suffered production shutdowns in Japan after the March 11th earthquake. Spurred by the fear of limited inventory, consumers then flocked to Toyota dealerships to snag a Prius before it was too late.
Now Schechter anticipates a spike in his commission checks not only because he’s been selling more cars, but also because he may soon be able to sell them at a higher price.
“If the cars are slower to get out to the market, they’ll go up a minimum of about $1,000,” said Schechter. “It’s a basic supply and demand situation.”
So far, inventory has kept up with demand. March sales were strong at a seasonally adjusted annual rate of 13.06 million, up from a revised 11.70 million in March of last year. Sales shrunk from February’s 13.38 million, largely due to the earthquake aftermath that April sales are expected to correct.
Production at Honda and Nissan, both based in Japan, also suffered from the earthquake’s effects. The two companies lost an estimated 46,600 and 42,000 vehicles respectively, according to statements.
But those losses may be recovered through record profit margins in April. A limited supply of their most popular models would allow dealerships to sell cars at sticker price, instead of haggling or offering incentives, said Nuno Pinto, a salesman for Toyota Hackensack in Hackensack, New Jersey.
“If we have to work with a low inventory, customers can’t bargain,” said Pinto.
If the shortage lasts, of course, Schechter will suffer, as will Toyota Motor Corp. A persistent lack of supply would mean losing customers to companies with available models.
The Prius is emblematic of the demand surge that April may see, as that hybrid has become increasingly popular since the unrest in the Middle East sent oil prices soaring and consumers searching for more fuel-efficient vehicles.
Most dealerships keep enough inventory on the lot to last them a month, and will likely cruise through any bumps in supply in the coming weeks. But specialty cars and hybrids like the Prius are already produced on a relatively limited basis, and already in such high demand, that they will be the first to take a hit from production slowdown if there’s one to be taken.
It’s too soon to know how much those production gaps will affect automakers’ business, said Peter D’Antonio of Citigroup Global Markets, who noted that inventory from before the earthquake will help dealerships keep up with demand for some time.
But if those dealerships do run short in April, he said, higher prices won’t be far behind.
“We haven’t really seen the effect yet, but that isn’t to say there won’t be one,” said D’Antonio. “If their supplies are short, they will raise prices.”