Vehicle sales, dealer revenues continue to climb

Jan. 1, 2020
Buoyed by a general improvement in the overall economy, U.S. automotive dealerships have continued to increase sales, increase employment, and even expand the dealer footprint.

Buoyed by a general improvement in the overall economy, U.S. automotive dealerships have continued to increase sales, increase employment, and even expand the dealer footprint. The National Automobile Dealers Association (NADA) released its annual state-of-the-industry report this summer, showing that total dealership revenue reached $676 billion in 2012, up 9.8 percent from 2011.

Service and parts revenues dipped slightly, from $81.46 billion in 2011 to $81.35 billion in 2012 (a 0.1 percent decrease).

Dealers in the U.S. also added an average of two employees last year, and average dealer revenues were up by 9.2 percent. While gross percentage margins in new vehicles fell, new vehicle department profitability as a percentage of gross profit increased to 30.4 percent, up from 28.8 percent in 2011.

Some of the largest dealer groups performed even better. Penske Automotive Group saw an 18.3 percent revenue increase in 2012 (reaching $13.2 billion). AutoNation announced record results in 2012, with total revenues of $15.7 billion, a 13 percent improvement.

According to data from NADA and R.L. Polk & Co., new light vehicle sales were up 13.4 percent (14.4 million, up from 12.7 million units in 2011). New medium and heavy- duty truck sales were up 13 percent, and used vehicle sales were up 4.5 percent (40.5 million units in 2012, up from 38.8 million in 2011). There are now 251.5 million light vehicles on the road, with an average age of 11.4 years.

Dealership footprint expands in U.S.

There is more good news for the market: There was a net increase of 95 franchised dealerships in the U.S., bringing the total up to 17,635 in 2012. Much of this growth came from the Western U.S., while the Eastern region actually saw a decline in the number of franchised dealers. The number of dealers shrank significantly from 2009 through 2011, with net losses totaling 2,470 dealerships.

For contrast, consider the situation in Europe. A separate report issued by UK-based ICDP, in its annual European Car Distribution Handbook, noted that main dealer sales networks in Western Europe have shrunk by 3 percent since 2011, although the size of service networks has remained stable and the number of sales agents has actually gone up by 2 percent.

Auto industry consultancy HWB International, meanwhile, chimed in that the UK and France have seen a total dealer decline of 10 percent in the past four years.

Service holds steady

Total franchised dealership service, parts and body shop sales exceeded $81 billion in 2012, although sales at the average dealer were down. Both labor and parts sales were down for customer mechanical repairs, warranty work, wholesales parts sales, and sublet work. Sales from internal work rose 9.9 percent for labor and 7.9 percent for parts. Net profits remain high, although they fell 17.4 percent from the 2011 numbers.

Average dealership service and parts sales declined 0.7 percent, from $4.64 million to 4.61 million. The share of gross profit held by the service and parts department fell to 44 percent from 45.8 percent.

With sales increasing, the adoption of service contracts also has expanded. New vehicle service contract penetration rates rose by 2.7 percent, and now stand at 42 percent of total new vehicle sales.

Body shops are becoming even more scarce at dealers, with the number of locations that had on-site body shops falling to 34 percent in 2012 (down from 36 percent in 2011). Total autobody work performed at new vehicle dealerships was stable at $6.9 billion.

Both AutoNation and Penske reported growth in the fixed operations segment, and expected that to continue moving forward. "We're very pleased with the momentum of our customer care business and believe we are well-positioned to capitalize as the units in operation base begins to grow again this year," said AutoNation president and COO Michael Maroone.

During an investor conference call earlier this year, however, the company's chairman and CEO Mike Jackson cautioned that "even though new vehicle volume is recovering from the depression levels of the past few years, our customer care and used vehicle businesses, which represent over half of our gross profit, are only beginning to recover in 2013."

According to NADA, there are 254,200 dealership service technicians in the U.S. (up from 252,400 in 2011), and 290,200 other service and parts workers (up from 282,500 in 2011).

The average dealer wrote nearly 14,000 repair orders, with total service and parts sales per customer repair order averaging $247 (warranty repair orders averaged $243). The average dealer had 18 bays and 13 technicians (down from the 2011 numbers), and a total parts inventory of $300,420 (an increase of more than $6,000, or 2.1 percent, compared to 2011). The average customer mechanical labor rate was $99.

According to the NADA study, 46 percent of dealerships service departments now operate on weekends, while 28 percent operate both evenings and weekends. However, these numbers are flat compared to the figures in 2011.

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