August 24, 2011 Autos Insider | Total of U.S. auto dealers rises in '11 for first time in decade | The Detroit News
Total of U.S. auto dealers rises in ’11 for first time in decade
The number of U.S. new car auto dealers rose slightly in the first half of 2011, as the auto industry added new dealers in urban areas, but shrunk some dealers in rural areas.
The overall increase — a 0.4 percent uptick, or 66 dealers to 17,725 — is the first reported one in a decade, according to Urban Science, a Detroit-based global retail consulting firm.
The firm said the number of urban-area auto dealers increased by 0.7 percent, while dealerships in rural areas fell by 0.5 percent.
The uptick represents the end of a series of precipitous declines in recent years in the number of auto dealers as two U.S. automakers filed for bankruptcies and numerous brands were shed.
The report — which covers Detroit's Big Three and all foreign automakers — also reported an increase in average sales per dealer, suggesting dealers are in financially stronger positions than they were at the close of 2010.
Average sales at dealerships have risen to 711 per dealership, an increase from 656 vehicle sales per dealership in December 2010.
Automakers have reported that a higher percentage of their dealers are profitable.
While the number of dealers went up, the number of franchises — the brands that a dealership carries — decreased by 729 franchises as of July 1, bringing that total to 29,360.
Urban Science said the decline in franchises is due largely to the wind-down of Ford Motor Co.'s Mercury brand at Lincoln dealerships.
This drop in franchises represents a major stabilization of the industry, following the closure of 4,897 franchises since 2009.
The U.S. had 20,000 dealers as of 2008, and has shed about 11 percent since then. Much of that came as General Motors Co. and Chrysler Group LLC used their 2009 bankruptcy restructurings to shed hundreds of dealers.
"The small but unusual bump in the number of dealerships can be attributed to market corrections as the automakers rearrange stores following a couple tumultuous years of network consolidation and dealership bankruptcies," said John Frith, vice president of retail channel solutions at Urban Science. "The good news is that as auto sales have increased, dealer throughput has increased by just under 8 percent, putting dealers in a better financial position to handle the current economic uncertainty."
Frith said the dealer network in Metro Detroit was flat for the first half of 2011.
But Urban Science said it expects to see the trend of dealerships slowly declining in numbers, as dealers become bigger with more franchises under one roof.
"We're not expecting to see any more big closures. Dealers are more efficient than ever and have learned to weather the downturns," Frith said.
Some automakers are trying to re-establish some dealerships in urban areas in places like California. High land prices and the shift of people to suburbs have resulted in some major metro areas having fewer dealers than automakers would like.