U.S. dealership count: Going up
Some brands are eager to expand; others make up for past cuts
 | Asbury CEO Craig Monaghan: We're talking about adding a number of stores. |
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In a surprising swing after the severe cutback in U.S. dealerships during the recession, some automakers are again adding stores.
This year is shaping up to be the second in a row with an increase in the dealership count. But the expansion isn't likely to last.
Several large groups recently have been awarded new franchises -- "add points" in industry parlance -- or are in discussions with manufacturers about new points.
Dealerships are being added by Asian and European automakers with ambitious growth plans. New points also are coming from domestic automakers that lost representation in some key markets after thousands of dealerships went out of business during the recession or were terminated by General Motors and Chrysler during their bankruptcies.
Penske Automotive Group opened a Mini store and a Nissan/Infiniti dealership in March. AutoNation Inc. was awarded Mini, Chrysler and Jeep franchises during the first quarter. And Asbury Automotive Group executives said in April that the company may increase 2012 capital spending if add-point discussions come to fruition.
"We've got a number of them in the mill," Asbury CEO Craig Monaghan said. "I hope before we go a whole lot further, you'll see some of those come to life. It's broadly across the board. You're not seeing it concentrated with one brand or another."
Enough add points could open in 2012 to increase the overall U.S. dealership count for the second straight year, said John Frith, vice president of retail channel solutions for Urban Science, which advises automakers on dealership representation. That would be a notable turnabout from the steady declines of recent years.
The U.S. dealership count rose 1 percent in 2011, to 17,859 stores, according to the Automotive News Data Center. That's still a far cry from the days before the recession, when 21,461 U.S. dealerships were in operation at the beginning of 2008.
Frith called the potential two-year upswing a short-term correction.
"The economy has come back a little quicker than most of the manufacturers were anticipating," Frith said. "And so there's some sudden demand and some opportunity to cover some areas that they might not have good coverage on."
No blue sky
Add points are a boon for dealership groups because they don't have to pay blue sky, as they might with acquisitions. Some retailers -- AutoNation, for example -- are using existing vacant real estate to build the new stores.
"Add points are very desirable for us," AutoNation CEO Mike Jackson said. "They're typically in the markets we represent with the brand that we don't represent."
In addition to the recently awarded Mini, Chrysler and Jeep franchises, AutoNation received another luxury brand add point to be announced this summer, COO Michael Maroone said. AutoNation opened one Audi and two Mercedes add points in 2011.
While many add-point opportunities are in the luxury segment, Maroone doesn't expect a flood of new locations.
"You just never know," Maroone said. "The manufacturers, in the new rational model that we're all enjoying today, are not trying to overdealer. They're looking very opportunistically, where they don't have representation and where they're underperforming."
Domestic brands are backfilling in markets where representation once was strong. Having a historical presence means a high number of that brand's vehicles are typically on the road in such a market. Asbury's Monaghan said. "For someone like us to be able to get in there and do the parts-and-service business alone is quite attractive," he said.
Penske's new Nissan/Infiniti store is in a historic seven-story building in downtown San Francisco, where the brands had been absent. The retailer's recent add points typically have been where there had been no representation or where population growth has triggered new demand, said Tony Pordon, Penske executive vice president of investor relations and corporate development.
Though Penske has other chances to gain add points in existing markets, Pordon doesn't expect a lot of growth.
"There are small opportunities that come about to get these open points," Pordon said. "But mostly the manufacturers are trying to grow their existing dealers."
That's the case with Hyundai. Though the brand added 15 franchises in 2011, Hyundai officials have said their focus is on increasing sales per dealership at existing outlets.
 | Maroone: Looking for opportunities |
Big jump at Chrysler
Mini is a different case. Mini has been expanding its dealership network since the brand was launched in 2002 with 66 dealerships. It added seven locations in 2011 and three more so far this year, bringing the total to 113 stores. That number is expected to jump to 125 within two years, Mini spokeswoman Nathalie Bauters wrote in an e-mail.
Chrysler group was the biggest mover in 2011, jumping by 135 franchises across its Chrysler, Dodge, Ram and Jeep brands. Fiat, which added 138 stores of its own last year, did not count toward the Chrysler increase.
Chrysler's recent expansion stems largely from consolidating brands under one roof, spokesman Ralph Kisiel said. That effort is pretty much done, and Chrysler's dealership count is likely to increase only slightly in 2012, he said. It is up by five stores so far in 2012, to 2,341.
A few open points remain in markets in which Chrysler wants to add dealerships to take the place of stores that went out of business during the recession, Kisiel said. For instance, two new stores in Dallas are starting construction now. Along with another Dallas-area dealership that opened last fall, they replace three stores that went out of business before Chrysler's bankruptcy.
Volkswagen, which has ambitious plans to more than double U.S. sales by 2018, has a two-phase strategy. In the near term, the company primarily aims to increase sales at existing dealerships. But it will open new stores on a selective basis through 2015, North American CEO Jonathan Browning said.
Beyond that, to meet sales objectives, "You need to start adding points," Browning said. "The emphasis is on first and foremost getting the penetration and throughput of our existing network, then, at a later phase, actually expanding."
Kia also has a long-term outlook. The brand added 25 outlets in 2011 for a total of 755 stores.
"In a perfect world of a 15 million industry, we're probably a dealer network of about 800," said Tom Loveless, Kia Motors America vice president of sales.
Kia will expand strategically in markets in which it makes sense, Loveless said, but "generally speaking, we're trying to support the network we have today."
With many brands still overdealered, Urban Science's Frith said the overall U.S. dealership count likely will start to decrease again after this short-term lift.
Said Frith: "They need to be cautious and not get too enthusiastic so they swing the pendulum too far the other way."
Christina Rogers contributed to this report
Jan. 1 -- dealerships -- change -- % change
2000 -- 22,004 -- –72 -- 0%
2001 -- 22,007 -- 3 -- 0%
2002 -- 22,146 -- 139 -- 1%
2003 -- 22,333 -- 187 -- 1%
2004 -- 22,177 -- –156 -- –1%
2005 -- 22,200 -- 23 -- 0%
2006 -- 22,089 -- –111 -- –1%
2007 -- 21,761 -- –328 -- –2%
2008 -- 21,461 -- –300 -- –1%
2009 -- 20,453 -- –1,008 -- –5%
2010 -- 18,607 -- –1,846 -- –9%
2011 -- 17,653 -- –954 -- –5%
2012 -- 17,859 -- 20 -- 1%
Source: Automotive News Data Center
You can reach Amy Wilson at awilson@crain.com.
