Suffering auto sales in 2008 have cost auto dealerships one quarter of the gross profits they generated in 2007, an Edmunds.com study has found.
The study used a dealership sample comparing sales in summer 2008 with those of summer 2007, finding 70 percent of dealerships had a decrease in gross profit margin. More than one in four dealerships lost more than half of their profit margin.
Despite the widespread loss of profits, dealerships selling Honda, Mini, Jaguar and Subaru saw overall improved profitability, the study found. Jeep, Volvo, Hummer, Land Rover, Ford, Saab and Acura dealerships overall lost more than 40 percent of their gross new-vehicle profit margin.
The study's results have "a silver lining" for automakers, Edmunds' AutoObserver.com Editor Michelle Krebs said.
"A lot of them have too many dealerships in the first place," Krebs said. "This is a way to decrease the number of dealerships more quickly."
The study found 30 percent of dealerships saw their new-vehicle sales drop from more than 55 units a month in 2007 to fewer than 55 in 2008.
The declining sales and profits means dealers will have to "tighten their belts more and more and more," Krebs said. But strong dealers may profit from their peers' struggles, she said.
"I think for a lot of dealers it will mean making tough decisions about whether they even want to be in the business," she said. "We'll see more attrition, but we'll also see buying and selling and consolidating."
Through September, U.S. vehicle sales have fallen to 10.77 million vehicles, down 12.8 percent from the same nine months of 2007.
The profit declines won't stop, Krebs said. Edmunds has predicted a 15 percent decline in October sales from 2007 and 14.0 million light vehicles sold in 2009 in the United States.
