Car dealer throughput rising

By Jamie LaReau, Crain News Service 

DETROIT (Aug. 22, 2014) — U.S. car dealership throughput — the average number of vehicles sold per store — is expected to break records in 2014, according to the latest Automotive Franchise Activity Report produced by Urban Science Applications Inc., a dealership consulting and data concern in Detroit.

This marks the third consecutive year of growth, but the experts behind the study warn that a downturn is inevitable.

The 2014 midyear projects nationwide dealership throughput is heading to 904 vehicles, based on forecast vehicle sales of 16.2 million.

That's up from a throughput rate of 874 vehicles at the beginning of the year, the report shows. The sales forecast is from consultants LMC Automotive.

“We know that automobile sales patterns are cyclical. It's vital to remember current sales levels are near the peak of this cycle and will drop before growing again,” said John Frith, vice president of Urban Science. “Planning for the downturn will help dealers avoid financial problems in the future.”

Mr. Frith said as dealerships near throughput of 1,000 units in the short term, auto makers “may be tempted to add rooftops to alleviate some of the pressure.” He advised against doing so.

“It's extremely important that instead, they focus their efforts on planning for long-term sustainability throughout the inevitable sales cycle,” Mr. Frith said.

The report shows an increase in the number of automotive dealerships in the U.S. over the year-earlier period. Through July 1, there were 17,903 dealerships, up 123 from 17,780 in the year-earlier period. The number of franchises increased by 80 to 31,489 in the same period.

Through July 1, auto brands added nine dealerships in Florida, eight dealerships in California and five each in Georgia, Kentucky, Michigan and Tennessee.

Many of those added in Florida, Urban Science said, came as franchises previously combined under a single rooftop were separated into stand-alone locations.

___________________________________________

This appeared on autonews.com, the website of Automotive News, a Detroit-based sister publication of Tire Business.