Car dealers are among the most resilient entrepreneurs in North America. Even when times are tough, they usually find a way to make money.
But last year, even with a whopping 17 million light-vehicle sales, a quarter of all U.S. car dealers lost money, according to preliminary information from the National Automobile Dealers Association. As recently as 2003, only 12 percent of all dealerships were unprofitable.
With sales so good, how can so many dealers be losing money?
You can chalk some of that up to the hurricanes that devastated the Gulf Coast last year. Although many of the dealerships that are back in business are doing well selling vehicles to replace those that were destroyed.
Some of the losses are due to the shift in sales away from General Motors and Ford products, but dealers from other brands also are unprofitable.
A lot of it is just thinner profit margins on new-car sales. Blame last summer's employee-discount incentives and the grind toward value pricing with skinnier dealer discounts.
Typically, when new-car sales are lousy, dealers turn their attention to other things, such as used vehicles and financial products. In 2005, however, they didn't make up enough of the difference, which is why dealers have been looking at other revenue sources.
Lately, they've been tapping into the $30 billion a year Americans spend on specialty products in the aftermarket. That means everything from appearance items such as wheels right up through the performance items that tuners use.
Several factories have turbocharged their parts operations to help dealers sell more add-on customization equipment when the vehicle is delivered as well as aftermarket parts later on.
The aftermarket folks now sense an opportunity.
For years, the Specialty Equipment Market Association, which represents independent parts makers, has reached out to dealers at the SEMA show held each fall in Las Vegas, and more importantly at the annual midwinter NADA convention.
SEMA members would love to have dealers buy and sell more of their aftermarket products. And when dealers get to Orlando, Fla., they'll find SEMA CEO Chris Kersting and his team waiting to tell them how to get a bigger piece of the pie.
Don't be surprised if this year more dealers decide to take a bite.
You may e-mail Edward Lapham at [email protected]