Rising Costs Hit Dealers
Looking back at total vehicle deliveries of 16.9 million units, 2004 was a very good automotive sales year. With more new product choices available to consumers, the actual availability and acceptance of new products appear to be the real factors in dealers being able to call 2004 a good year from a unit-sales standpoint. From a profit standpoint, 2004 was not without challenges. Without exception,
February 1, 2005
Looking back at total vehicle deliveries of 16.9 million units, 2004 was a very good automotive sales year.
With more new product choices available to consumers, the actual availability and acceptance of new products appear to be the real factors in dealers being able to call 2004 a good year from a unit-sales standpoint.
From a profit standpoint, 2004 was not without challenges. Without exception, the average NCM clients' expenses (highline import, regular import and domestic dealers) increased more than their total dealership gross in 2004.
Income was up in each category. That may cloud the gross to some degree, but the “raw numbers” indicate a reduction in the average client total dealership net-profit performance.
Take a look at NCM client data and benchmark it to your own.
Net Profit Change | Domestic | Regular Import | Highline Import | My Dlrshp |
|---|---|---|---|---|
- 13.9% | - 3.7% | + 0.2% | % |
Retail sales volume changes by category for the average dealer client are as follows:
Category | Domestic | Regular Import | Highline Import | My Dlrshp |
|---|---|---|---|---|
New Vehicle Retail | - 4.2% | 2.1% | 4.2% | % |
Used Vehicle Retail | - 4.2% | - 2.3% | 4.8% | % |
In the variable operation, expense management performance changes stated as a percentage of total departmental gross:
Expense Category | Domestic | Regular Import | Highline Import | My Dlrshp |
|---|---|---|---|---|
Advertising | + .4% | + 1.2% | + .8% | % |
Floor Plan Interest | + .17% | + .28% | - .19% | % |
Employment Expense | + 1.1% | + .3% | + .9% | % |
Cost To Sell Change | + 5.45% | + 2.77% | +1.49% | % |
For the average dealership, the greatest cost increase was personnel, including benefits. An interesting set of statistics as it relates to 2004 employment expense is as follows:
Employment Expense | Domestic | Regular Import | Highline Import | My Dlrshp |
|---|---|---|---|---|
As % Total Op Gross | 38.7% | 36.2% | 30.7% | % |
As % Total Expense | 42.7% | 40.9% | 40.4% | % |
The average month's gross per employee remained somewhat consistent compared to 2003. The average client results:
Gross Per Employee | Domestic | Regular Import | Highline Import | My Dlrshp |
|---|---|---|---|---|
Average Month | $6,625 | $7301 | $10,377 | $ |
Leading economic indicators are encouraging for the year, but what does 2005 have in store for your operation? What steps can be taken by your team to improve on the 2003 vs. 2004 trends? What steps should you take to ensure the gross vs. expense ratio trend doesn't continue if it's headed in the wrong direction?
A starting point is talking with your management team regarding these trends. Identify areas of concern, establish a game plan to improve these areas and then monitor your monthly progress. Good Selling!
Tony Noland ([email protected]) is the president and CEO of NCM Associates, Inc.
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