Auto Dealer Statistics Signal Stability as Declines in Franchises Slow

DETROIT, Feb. 16, 2011:Urban Science today released statistics and insights from its 2010 Automotive Franchise Activity Report, which shows the dealership network has begun to stabilize after two years of consolidations, arbitrations and bankruptcies.  As of Dec. 31, 2010, there were 31,139 franchises and 17,659 dealerships in the U.S., a 4.4 percent decrease in the number of dealers in 2010.  This is an improvement over 2009, when dealership attrition reached an unprecedented 8 percent.  Normal annual dealership attrition is between 1 and 2 percent.

Nearly all of the decline can be attributed to the domestic brands as import brands were relatively unscathed by the economy, with stable dealer counts for the last several years.

The report also shows that domestic brands have begun to realize the affects of realignment and consolidation efforts with increased sales per dealer.  Additionally, the entire dealer network has experienced double-digit increases in profitability ranging from 38 to 129 percent.  

"Domestic dealers have been through a lot in the last two years, facing economic challenges, consolidation, arbitration and brand elimination and are poised to experience improved profits in 2011," said John Frith, vice president, Urban Science.  "The domestic consolidations worked, and have allowed the remaining dealers an opportunity see their numbers rebound faster."

The impact of consolidations on domestic brands can best be seen in the Automotive Franchise Activity Report's analysis of throughput, the average number of sales per dealership, which rallied in 2010 to 656 sales per dealer, up from a low of 564 sales per dealer in 2009.

"The reason for the tremendous rebound last year and into this year is not only increased sales, but that those sales are now concentrated among a smaller number of dealers," said Randy Berlin, global director, Urban Science. "Dealers have also gone through major cost reductions, so the increased sales and throughput are going straight to the bottom line, giving dealers increased profitability."

Urban Science estimates that if the automotive market reaches 12.9 million sales(1) in 2011, average sales per dealer could increase to around 745, a number last seen when the industry was selling between 16 and 17 million vehicles.

Other key points from the 2010 Automotive Franchise Activity Report included:

• The biggest declines in franchises came from the discontinued brands: Hummer, Pontiac, Saturn and Mercury.
• Additional attrition will come in 2011 as Mercury closes its remaining 819 dealerships.
• Chrysler, Jeep, Kia, Mini, Hyundai and Subaru added dealerships in 2010.
• For the first time, Ford has the highest number of dealerships, just slightly ahead of Chevrolet.  It's the first time Chevy and Ford have been so closely aligned.
• Chrysler, Dodge, Jeep and Ram are very close to their consolidation strategy with about 86 percent of stores combined at all four brands.

Urban Science also cautioned dealers and OEMs to be prepared for an increase in customer leads as a result of 29 all-new model launches in 2011.  Urban Science estimates that new product launches drive anywhere from a 50 to 525 percent increase in leads, which puts a burden on dealership staff to sort through and respond.  These leads are critical tools for dealers with 15 to 30 percent of all sales now coming from Internet leads.

"The high number of internet leads will require dealers and OEMs to implement a strategic lead management system to assist in sorting good and bad leads," said Jody Stidham, global practice director, Urban Science.  "It's important dealers and OEMs work cohesively to manage these leads and effectively provide good customer service without wasting valuable resources."

About the Automotive Franchise Activity Report

Urban Science maintains a list of current new vehicle dealership and franchise information for all car and light truck brands in the United States. Compiled on a monthly basis, the census is the most reliable source of dealership statistics. The data comes from a variety of sources, including feeds from automotive manufacturers as well as phone and field verification. Urban Science has been collecting this information since 1990 and compiles a yearly analysis every February for the previous year in its annual Automotive Franchise Activity Report.