Study sees dealership throughput breaking records in 2014

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For the third consecutive year, U.S. dealership throughput -- the average number of vehicles sold per store -- is expected to break records in 2014, a new study found.

But the experts behind the study warn that a downturn is inevitable.

The 2014 midyear Automotive Franchise Activity Report projects nationwide dealership throughput is heading to 904 vehicles, based on forecast vehicle sales of 16.2 million.

That's up from a throughput rate of 874 vehicles at the beginning of the year, based on a report released Thursday and produced by Urban Science, a dealership consulting and data concern in Detroit. The sales forecast is from consultants LMC Automotive.

“We know that automobile sales patterns are cyclical. It’s vital to remember current sales levels are near the peak of this cycle and will drop before growing again,” John Frith, vice president of Urban Science, said in a statement. “Planning for the downturn will help dealers avoid financial problems in the future.”

Frith said as dealerships near throughput of 1,000 units in the short term, automakers “may be tempted to add rooftops to alleviate some of the pressure.” He advised against doing so.

“It’s extremely important that instead, they focus their efforts on planning for long-term sustainability throughout the inevitable sales cycle,” Frith said.

The report shows an increase in the number of automotive dealerships in the United States compared with the year-earlier period. Through July 1, there were 17,903 dealerships, up 123 from 17,780 in the year-earlier period. The number of franchises increased by 80 to 31,489 in the same period.

Through July 1, auto brands added nine dealerships in Florida, eight dealerships in California and five each in Georgia, Kentucky, Michigan and Tennessee.

Many of those added in Florida, Urban Science said, came as franchises previously combined under a single rooftop were separated into stand-alone locations.

You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on Twitter


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