Auto manufacturers produce a specific quantity of cars based on many factors. If you ‘ve been following the industry for a while you may have noticed that US brands and the Asian competition use the “push ” system of moving product. The car company builds and builds based on what they feel the market will want and then pushes them on the consumers through marketing and incentives; the greater the actual demand the less the incentives and vice versa.
BMW and most upscale brands use the “pull ” model where they produce cars almost on demand only. BMWs system relies on market data in addition to past and recent performance of dealers to judge the demand for specific models. The other key to this system is that underperforming dealers or those performing well will get what they can actually sell. Dealers want to get cars so they can sell them and make more money, but BMW does not want decrease the overall sales price of cars by having a dealer that is not moving product have to liquidate an overstock.
In order to keep all these variables in check BMW uses a complex system of allocations. Allocations essentially give a dealer the “right ” to build a certain quantity of cars based on model and type. Allocations and how they are established is proprietary in nature and is not discussed all that much but we can explain the basics.
Since the “hot ” topic of the last few months is the 1M Coupe, we will use that of the basis of our delving into the realm of how the allocation system works.
Knowing the limited nature of this car we informed our readers many months ago to get their name on the TOP of the waiting list and to place a deposit. We did this as with most BMWs each dealer is given at least one car. So if your name was on the top of the list with money down the dealer was going to sell you a car (that was easy).
The concern arises when someone else beat you to the dealer and has car number one. Based on some agreed upon formula BMWNA determines what dealers will get more “builds “. In the case of the 1M Coupe, since it is an M model as well as a 1 Series the number of units sold of Ms and 1s (and other variables that only BMW knows) in the past determines the units the dealer will receive over the course of the new models production run.
When the allocations fall is based on many contributing factors, such as when BMW AG in Germany has given the specific BMW market at large (BMWNA in our case) dates for the builds. This is based on market launches, seasons (not going to launch or build a lot of convertibles during winter, holiday breaks etc.), and supply chain issues. Once BMWNA receives its builds it then divides them up to the dealers using more formulas that account for a lot of variables- rewarding dealers that have performed well and reinvested in the brand.
In general large dealers that sell many cars are high priority and those selling little are not. With the 1M some dealers may see upwards of 4 cars during the run, others just one. Low volume dealers that are not high on the priority list might not see their only car until November while larger dealers where cars move out quick may get most or all of their allocation at the launch.
It is a complex system of numbers and variables that sets allocations, but over time the system has evolved and works well enough to keep dealers happy and to not overfill lots and diminish car values.
Just remember, when you have a certain amount of product you need to move you want to place them where they have the highest chance of being sold. This system is not all that different. We hope this sheds even a little light on this system.