The consolidation of U.S. auto dealerships has slowed from the frantic pace caused by the recession, but it's still hard for small operations to flourish.
A total of 3,808 dealerships disappeared in 2008, 2009 and 2010 amid crashing sales and brand failures, according to the Automotive News Data Center. After a tiny rebound in 2011, the dealership count dropped 1 percent to 17,760 in 2012.
Single-point and small-group operations certainly aren't on an endangered-species list. Strong entrepreneurs can and will buck the trend indefinitely with their drive, energy and will.
But the underlying economics favor continued dealership consolidation. Large groups gain definite economies of scale by combining back-end departments. Current low interest rates and available credit make it easy for large dealership groups to finance acquisitions.
And with auto sales growth expected to slow, dealer pretax profit margins could fade from the 2.2 percent of sales the National Automobile Dealers Association called average in 2012.
But up to 3,800 stores could fail by 2020 without an orderly consolidation, a new study by Roland Berger Strategy Consultants projects.
The pressure on independents and small dealership groups will continue and likely grow.
Blue sky values are high for now. So it's time for dealer principals, especially in family-owned businesses, to assess the long-term health of their operations. The desire to pass along a healthy business to the next generation is powerful.
But that makes succession planning and training even more essential. The alternative is putting family members at risk of an uncompetitive store and a forced sale.