SAN FRANCISCO - An avalanche of new products in the industry could help drive up dealer profitability in the next five years. But only if automakers restrain from opening large numbers of new stores.
In the next five years, 60 new models are expected to hit the market, pushing the total number of available products to more than 290, according to a forecast by J.D. Power and Associates. That expansion, plus a steady growth in industry sales in the next five years, will mean higher per-store sales for most brands, said Tom Libby, J.D. Power director of consulting. But Libby said that the reality will differ from franchise to franchise.
"In some cases, like Buick, you'll see higher sales per dealer,'' Libby said at Power's annual International Automotive Roundtable here Friday, Jan. 31. ''But in some franchises like Saturn, Hyundai, Kia, and probably Volkswagen and Volvo, there will probably be some expansion in the number of dealerships."
Each year, J.D. Power presents a franchise-by-franchise review that considers an auto company's product plans, dealer profitability, image and product quality.
Libby would not comment on Power's specific findings, which are confidential. But he emphasized that other factors will enter into the profitability equation. Among them: incentive and marketing costs and product quality.
"Sales per dealership is a key issue, but far from the only issue," he said. "The brands have to continue focusing on product quality."
Libby said the quality gap between the industry's top vehicles is getting so narrow that even slight blips in one model's quality can bring down a brand's report card and its image.
"Toyota and Lexus have established very high quality standards in the market," he said. "It's difficult for anyone to compete against them and not focus on quality."
Libby also said that improved profitability and higher quality will not necessarily translate into more market share. He said that some franchises simply are so large that the challenge will be maintaining volume, not increasing it.