A softening economy, declining consumer confidence and a consumer safety fiasco could all be potential culprits for declining new car sales among this year's Ward's Dealer Business Top 500 dealers.
The '90s was the decade of the sport/utility vehicle (SUV), but interest in the vehicle segment may be waning. "The fad is slowing down a bit," says Jim Mateyka, analyst with AT Kearney. "I guess if you're a dealer of any one particular model the model is decreasing." However, he notes that the glut of new SUVs coming out is allowing for a continuing growth in the market, but it's not growing as rapidly as in previous years.
Fred Ricart of Ricartin Columbus, OH, number 2 on this year's Dealer 500, attributes some of the drop in new car sales at his dealership to the continuing Ford Explorer/Firestone tire fiasco. "We tried a variety of marketing programs, but none were effective," he says of efforts to get Explorer sales back on track. As a result, Ricart Ford’s new retail truck sales dropped to 6,875 units from last year’s 7,934 units and revenue is down to $171.4 million from last year’s $193.6 million.
Jack Fowler, president of Somerset Pontiac-GMC of Troy, MI, with 82.6% of new car and truck retail sales, says he isn't worried about being down in unit sales, blaming the economy and a "natural ebb and flow" to his customers' buying habits. "This is an area with a lot of GM employees and a lot of them buy on a two or three year basis," he says.
However, where new car sales declined for many of this year's dealers in the 500, used car sales picked up the slack. Mr. Mateyka believes used cars are "very critical" for dealers as more customers are coming to realize the difference between a new car and nearly new car isn't so great.
"That's one area that the programs for the manufacturers on the nearly new cars are getting better and better," he says of the burgeoning certified used car market. Although first started by luxury automakers like Mercedes andto compete with luxury Japanese imports, certified used car programs have begun to trickle down to lower-priced segments.
Mr. Mateyka also notes that the consumer is more in control now than ever. "Consumer power of those programs is very high. It's very profitable [for dealers]." He adds surveys are showing the number of people willing to buy a used car is growing.
Mr. Ricart for one sees improvement at his dealership. "The more time I spend in my used car department, the better they seem to get," he says. Ricartis the used retail leader in both units and revenue on this year's Dealer 500. Units were up to 13,436 from last year’s 11,831, slightly increasing revenue from $131.4 million in 1999 to $131.5 million last year.
However, Mr. Mateyka notes that eventually the profitability of the used car business will erode as it gets more and more "institutionalized." But until then, he thinks there's "an opportunity for dealers. Consumers would rather buy a used car from the people who made it and from dealers who service it all the time."
For many dealers, success, no matter how far sales may be down or up, can be attributed to good customer service. Rick Case, owner of Rick Case Acura/, with 79.7% of new car and truck retail sales, goes so far as to give out his home phone number to customers, in addition to his cell phone number, so he can be reached at all times. He also encourages his employees to do the same. "This is a people business, one-on-one, and you have to sell cars one at a time. Personal service is what customers want," he says.
As for where future sales will be coming from, Mr. Mateyka believes the so-called 'crossover utility' segment (CUV) will be where it's at. Products like the Acura MDX and new Buick Renedzvous, that offer the look of an SUV but the ride and feel of a car, will be popular amongst buyers. "I see the whole category broadening," he says. "There's still more innovation going on in terms of design than in the passenger car side." He points to vehicles like the Ford Explorer Sport Trac, that is an SUV with tiny pickup truck bed on the back, as an example.
Mr. Mateyka also theorizes that domestics will continue to lose market share to imports in the key SUV and truck segments, especially now that more import automakers are coming out with SUVs and trucks, long a staple of domestic automakers success.
"and did not have full product lines and were aggressively focused on cars. Now Toyota has four or five SUVs," he says. "The Japan-based companies built products that are credible in the truck, sport utility and van area. I would argue Toyota's pretty much caught up but Honda is way behind because they are car and not truck or SUV focused."
Greg, president of Longo of El Monte, CA, the top dealership on this year's Dealer 500 and number one in new retail car and truck units and revenue, is ready for the fight. "We've got good product and good people and I think that's a big part of our success," he says. "We're always trying new ideas and new things. The best thing is the competition is getting tougher."