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According to the National Automobile Dealers’ Association (NADA), profits posted from automotive retailers last year were the highest on record; the average being $785,855 per store before taxes.
As a percentage of total sales, pre-tax profits for the year were some 2.3 percent, a level not seen since 1978, according to NADA’s chief economist Paul Taylor. This contrasts to recent years, where most dealers reported losses. In fact, the average profit per vehicle in 2011 was $23, versus a loss of $180 the previous year.
Taylor believes the reason for the change in fortune is due to a combination of economic growth, stronger vehicle sales spurred by low interest rates and fewer dealers (a number of stores closed during the recession, particularly Chrysler and General Motors facilities).
According to the NADA findings, the biggest increase in terms of sales at the dealer level last year concerned new vehicles (15.6 percent), followed by used vehicles (9.8 percent), while parts and service sales were up by around 5.7 percent.
Taylor said that the service department’s gross profit, as a percentage of fixed costs, actually declined last year by almost two percentage points, from 59.6 to 57.8, though he says that’s to be expected because increases in new vehicle sales traditionally boost fixed costs and parts and service sales haven’t increased as quickly.
So, does the new scenario hint at golden era for automotive retailers? It’s difficult to say, though Taylor is urging dealers to make the most of the opportunity presented to them. “Make hay while the sun shines,” he said during an interview with Automotive News.
Given the painful lessons learned over the last few years, despite the encouraging numbers, there are signs dealers are erring on the side of caution, focusing energy on the used car and parts and service business, which tends to be more profitable — even in the worst of times. That could mean that if growth continues, it will be less dramatic but likely more sustainable in the long run.
“Everyone learned a lesson in expense control over the last few years,” said Dick Heider, a Colorado based dealer account, ”and I think this will not be forgotten soon. Dealers are smarter and more focused on efficiency within their stores now than in the past.”
[Source: Automotive News]
When it opened last year Chrysler‘s Motor Village, located in downtown Los Angeles, made quite the impression, though not entirely a good one.
The corporate owned store was created by shutting down a franchise dealer, which caused quite an upset among local Chrysler dealers who argued that the company breached state franchise laws which bar it from opening up and running a store within 10 miles of other dealers.
Now after almost a year, the Auburn Hills, Michigan based automaker plans to sell Motor Village to New Century Automotive Group, after a constant stream of complaints from local auto retailers.
North Hollywood based New Century is owned by Dennis Lin, a successful Southern California car dealer who operates multiple import brand stores in the region.
As part of the agreement, Chrysler will retain ownership of the land and buildings, through its realty division, though New Century will own the franchise rights and inventory.
“I really think that Chrysler Group and Fiat are a great marriage,” stated Lin during a recent press statement. “We have Fiats now and more coming in the near future. I’m excited about the new and improved Chrysler, Jeep, Dodge, and Ram products that were launched this year, and the new product coming out now for 2012. I’m very comfortable adding Chrysler Group and Fiat to the product lines I already sell.”
Part of the reason New Century was attracted to Motor Village, was not only the downtown LA location, but also the way the facility is set up, with individual sections for each vehicle brand, as well as it’s loft appearance, which provides a somewhat intimate, sophisticated ambiance, distinctly different from most modern dealerships.
[Source: Left Lane News]
Consumer Electronics retailer Best Buy is already selling Brammo electric motorcycles and has won contracts to supply home charging equipment for the upcoming Ford Focus Electric and Mitsubishi i Electric Vehicle. Now, it looks like the company might actually consider selling electric cars or at least contribute in some way to the ownership experience.
Chad Bell, a senior director from Best Buy, recently said, “we are having conversations with startups,” and “we are very excited about several partnerships that we can’t talk about yet.”
From some angles selling EVs make sense. Best Buy currently has 1,101 stores across the U.S. and as Bell noted, the company’s retail stores have far higher volumes of people coming through their doors every month than most dealers.
Having access to a turn-key retail network already vested in the field of electronic transportation could prove very attractive for small companies trying to break into the market, but at the other end of the spectrum, Bell says there are plenty of opportunities for Best Buy to work with established auto manufacturers. Examples include teaching consumers about EVs and how to operate them; including charging equipment, as well as syncing smart phones with vehicle connectivity systems, tasks that many dealers might find more effective to outsource than performing in-house.
In regards to the push for more EV vehicle focus, Best Buy’s Bell said, “it’s not a short-term play for us. This is a long-term business for us to be in.”
[Source: Automotive News]
In the old days, fierce brand loyalty was a given when it came to car sales and it was often handed down through generations – i.e. your grandfather drove a GM product, your dad drove a GM product and so did you.
Not any more. According to a recent survey by Morpace, these days, when it comes to shopping for vehicles it’s all about the deal. Out of 1,000 people surveyed, approximately 74 percent said they’d choose a vehicle based on price and incentives. Not only that but research shows they’re often willing to travel to get the best deal on a car or truck, so even much talked about elements such as customer service and dealer location don’t appear to be hugely important.
In fact, the survey illustrated that although many vehicle purchases might begin with referrals from family and friends, along with prior experiences and dealer marketing programs, when it comes to the actual purchase consumers “are willing to travel for a good deal on the product they really want, ” according to Morpace Vice President Karen Gaule.
As a result, when GM and Chrysler terminated more than 2,000 dealerships last year, there was little mourning, at least from consumers.
“The fact is, the American consumer buys products that are convenient, predictable and affordable. It’s the same for cars. The most important factors for a car buyer are overall price and monthly payment,” said Ed Tonkin chairman of the National Automobile Dealer’s Association at a conference in Detroit last week.
And with that kind of statement coming from the horse’s mouth, one question we have to ask ourselves now is, when will Walmart start selling cars?
[Source: Automotive News]