Dealership shakeout over as stores sprout again, NADA says
Photo credit: BLOOMBERG
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DETROIT -- The great dealership shakeout has ended.
The National Automobile Dealers Association, in a new report, says there was an increase of 66 U.S. dealerships during the first quarter of 2012 and said the figure could climb as the auto industry recovers from the downturn.
NADA said the consolidation in the number of U.S. franchised dealerships has slowed significantly after large net losses of 1,550 dealerships in 2009, 760 in 2010 and 160 in 2011.
The trade group said there were 17,540 U.S. dealerships at the end of 2011, compared with 17,700 at the end of 2010.
"The arrival of new brands and new dealerships is a sign that even more vigorous competition is on the way in the U.S. vehicle marketplace," Paul Taylor, NADA's chief economist, said in a statement. "As new brands enter the U.S. market, the net dealership count may increase in future years of strong economic growth."
The findings are part of "NADA Data 2012," a report released Monday by the trade association. It's the group's latest state-of-the-industry report on dealership financial trends.
Dealership groups shopped for acquisitions last year, and manufacturers restored some dealerships and "inaugurated others as new brands opened for U.S. business," the report said.
The NADA study follows other recent reports that automakers are adding U.S. sales points as light-vehicle demand steadily rebounds after plunging to 10.4 million units in 2007. U.S. new-car and -truck sales have increased 26 percent through May and are on track to hit 14 million units or more in 2012.
Urban Science, a dealer consulting firm, said it found 30 dealerships have been added in the United States since Dec. 31. Some of the new dealerships reflect brands and dealers that have decoupled; for example, a VW/Kia dual dealership becoming two standalone stores, Urban Science said.
Several large dealership groups have recently 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 sales goals. New sales points also are being added by domestic automakers that lost representation in key markets after thousands of dealerships went out of business during the recession or were terminated by General Motors and Chrysler under bankruptcy.
The number of light-vehicle franchises in the United States remained virtually flat, falling 78 franchises or less than 1 percent from a year ago to 29,231 as of Jan. 1, a separate study by Automotive News found. The number of dealerships that house those franchises edged up 1 percent to 17,859, according to the annual census compiled by Automotive News using data provided by automakers and some estimates.
It's a sharp change from 2010, when the number of franchises dropped 16 percent to 29,309 and the number of dealerships dropped 5 percent to 17,653 as of Jan. 1, 2011.
Profits, employment rebound, too
The average U.S. auto dealership also saw profits rise last year as the three-year nationwide consolidation of dealerships stabilized, NADA said.
The growth in new-vehicle sales helped boost the average dealership's net profit before taxes. Last year, the average dealership's net profit before taxes rose 24 percent to $785,855 from $635,926 in 2010.
Employment at dealerships also rose about 5 percent to 933,500 in 2011.
The average dealership saw new-vehicle revenue rise in 2011 to $18.9 million or 54 percent of total dealership sales from $16.6 million or 53 percent in 2010. Used-vehicle sales as a percent of total sales dipped slightly from $11.2 million or 32 percent of total sales to 10.2 million or 33 percent.
But the average new-vehicle selling price rose 3 percent to $30,659. The used-vehicle selling price jumped 5 percent to $17,267, the report said.
Used vehicles contributed one-quarter of operating profit in 2011, down from one-third of operating profit in 2010, the report said.
While profits were up, so were advertising expenses last year on higher unit sales.
Franchised new-vehicle dealers spent just over $6 billion on advertising in 2011, up from just under $6 billionin 2010. But the average ad expense per new vehicle sold fell to $628, down 4 percent from 2010.
Amy Wilson and David Phillips contributed to this report
You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on 
