NADA Data shows dealer profits eroding

U.S. franchised new-vehicle dealerships sold about the same number of new vehicles through June this year as they did a year earlier, but dealers are making less money on them, according to the National Automobile Dealers Association's midyear NADA Data report."There is a lot of sales pressure in terms of margins and rising incentives," Steven Szakaly, NADA's chief economist, told Automotive News. "We had a really good month last month, but that was due to Houston," where sales spiked as consumers replaced vehicles in the aftermath of Hurricane Harvey.Based on the midyear results, released Thursday, Szakaly said dealers can expect continued profit erosion in the months ahead. Manufacturing "is still running higher than the annual sales pace," he said, a trend that traditionally leads to greater price competition and profit-sapping incentives.Even profits on used vehicles, which are typically fatter than those of new vehicles, will narrow because "residual decline is accelerating and depreciation is accelerating," Szakaly said.In contrast, he added, "Those guys who are running service well -- that is a bright spot."NADA's annual sales forecast remains at 17.1 million vehicles, he said, adding that it's still "a decently good year." But to offset pressure on per-vehicle profits, "It's going to be all about running a strong service business and meeting the sales incentives that are so harmful to this industry," Szakaly said. New-vehicle department

NADA Data shows dealer profits eroding

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