Except they aren’t supporting a bigger market, or else all inventory would be snapped up, resale values would be holding up better, no?Not in this case, there is an oversupply of millionaires demanding and supporting a way bigger market than ever before.
Seems we may be going round in circles here. I think everybody agrees the absolute number of folks that can afford a 300K car has grown significantly. The manufacturers used that data point precisely to support their volume increases and endless model variants over the last several years. So the current inventory is simply too high.
However, supply IS being rationalized, largely forced by Covid-19. But it would have had to happen, anyway.
I think what is interesting to contemplate is how much of the boom & bust cycle is spent in relative equilibrium, i.e. where production roughly equals demand. Coming out of this downturn (however distant in the future) there WILL be a period where demand is greater than supply. Because wealth will grow faster than production can ramp.
The key for a luxury brand, of course, is to maximize the brand’s equity without selling it out. McLaren’s original business plan ended up being too lofty, so they backed themselves into a corner by building out too much capacity and needing to show investors ROI.
Now with production cuts being literally forced upon them, they do have a second chance to create a plan that is more agile with respect to demand fluctuations and pay more attention to the brand’s long term value. BUT, they need to solve the cash crunch first AND have leadership and investors that understand the importance of a proper strategy. Both far from forgone conclusions at the moment.
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