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Background
This
industry is comprised of over 50,000 car and truck dealers in the
United States with estimated annual sales of $500 billion. The 100 top
auto dealer groups account for less than 15% of the industry sales in
this highly fragmented sector.
The
average dealership sells 650 new cars per year, generating about $25
million in total revenue. The new car dealer performs three key
services to their customers: (1) new car sales; (2) used car sales;
(3) auto repair service. Because new car sales have begun to operate
at only a break-even point, the focus on service is growing more
intense.
The
foundation of this industry is built on franchise agreements that
dealers and manufacturers enter into together, typically lasting one
to five years. These franchise agreements, which allow the dealer a
non-exclusive right to sell the manufacturer’s cars and related
parts within a specific market area, including use of the
manufacturer’s trademark, create a high barrier to entry into the
dealership business. The manufacturer provides marketing and training
support to dealerships along with sales incentives while imposing
operating requirements on the dealer in terms of inventory, working
capital, sales practices, showrooms, service facilities and monthly
reporting.
Trends/
Threats and Challenges/ Opportunities/
 The
auto dealer industry is facing new trends, such as:
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Dealer Websites
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Online Buying Services and Pure Play Dealers
Struggling
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Hidden Charges on Car Loans Draw Lawsuits
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Cyclical Business
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Consolidation
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Multiple Franchise Agreements
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Nontraditional Sales Techniques
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Low-Mileage Used-Car Flood
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Shift to SUVs and Trucks
Those with dealerships must recognize the threats
to their continued success:
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Consumer Spending Patterns
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Interest Rate Changes
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Rollover Ratings
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Competition
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Potential Franchise Disputes
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Fundamental Changes in Automobile Distribution
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Environmental Concerns
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Potential International Trade Disputes Could Affect Foreign Car Sales
Auto dealers can take advantage of the
opportunities that are available within their industry:
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New Car Dealers Use Political Muscle to Fight
Manufacturers
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Greater Profits in Services and Parts
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Title Branding
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Dealers Become Internet Savvy
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Aftermarket Product Sales
PKF North America Support
To assist the
PKF NA
firms that focus on the auto dealer niche, the following
special products and programs are available:
- Exclusive niche text for use in brochures, proposals, on members’ websites, etc.
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A niche program, usually in conjunction with the AICPA National Auto Dealers Conference
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Periodic conference calls focusing on hot topics and industry issues
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Networking through the PKF NA auto dealer e-mail lists and the threaded discussion forum
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PowerPoint program
designed for presentations with auto dealers
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