U.S. dealership count remains flat, throughput soars

DETROIT -- The number of dealerships in the United States last year remained relatively flat, with pockets of increases. But with a recovering economy driving sales higher, the average number of new-vehicle sales per dealership surged, according to a study released today by Urban Science.

That trend is expected to continue over the next three to four years, said John Frith, a vice president at Urban Science, a retail consulting company in Detroit.

"We have a few less dealers, but not very many. It's almost flat. If you discount Suzuki and the last few Maybach dealerships that closed during the year, we actually have a few more franchises out there than we did a year before," Frith said. "That's mostly Chrysler" tweaking its retail network.

Frith was referring to Chrysler's actions to make all of its brands available at all of its dealerships. It also has added more than 210 Fiat stores since 2011.

Slight dip

The 2013 Automotive Franchise Activity Report showed a slight dip in the number of U.S. dealerships. It projects the overall retail network will remain basically stable for a fourth straight year in 2014.

As of Jan. 1, there were 17,838 dealerships, or rooftops, a 0.1 percent decrease from 17,851 a year earlier.

"If I had to predict, we'll see two- to three-tenths of an increase in dealership count this year," said Frith. "That's to come back from that trough in 2007 and 2008. In the next three to four years, we'll see flat and slight uptick in the number of dealerships."

Frith said that will be the result of different manufacturers "filling in holes in their network."

"There will be no real pattern of East Coast or West Coast," Frith said. "It will be a onesy or twosy kind of thing. I don't know of any manufacturer having a big push."

Profitability driver

The dealership count impacts dealers' profitability because of its relationship to throughput, the average number of sales per dealership.

Based on 2013 new light-vehicle sales of 15.6 million units, Urban Science's analysis shows throughput increased to a record average of 874 sales per dealership, up from the prior record average of 812 set in 2012, the report said.

That's significantly higher than the recent low of 564 sales per dealership in 2009, the report said.

If 2014 vehicle sales reach 16.15 million, average sales per dealership will hit 914, Frith said. But Urban Science expects throughput levels to ultimately stabilize at around 850.

California, Texas

About 96 percent of local markets had virtually no net change in dealership count last year, the report found. The most significant dealership increases occurred in California, with 34 new dealerships, and Texas, with 15 new dealerships. These two states also showed the greatest increases in 2012.

"Most of the gain was in the Los Angeles and San Francisco markets and that's with Chrysler adding the extra franchises and a few dealers," Frith said.

As of Jan. 1, there were a total of 31,440 franchises, or brands awarded to dealers, a 0.5 percent decrease from 31,608 from a year earlier. The slight decrease can be attributed largely to the closure of 220 Suzuki franchises.

Frith said the industry is in balance right now in relation to the number of dealerships and franchises and the sales rate.

He warned: "Everyone needs to stay in balance here because if there is a downturn, you want to be able to survive that."

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