Are New Dealerships Sprouting Up Too Soon?
Massive dealership consolidation was the hallmark of 2009 and 2010, with more than 2,300 new-car stores shutting their doors. In fact, the number of franchise dealerships as of Jan. 1 ― 17,700, according to NADA ― was the lowest it’s been in more than 20 years.
But with Chrysler and GM out of bankruptcy, and vehicle sales on the upswing, dealerships are starting to crop up again. Here are some recent reports I’ve seen:
• Hendrick Automotive has opened a Chrysler Dodge Jeep Ram dealership in Hoover, Ala., expanding its auto lineup at the former site of Don Drennen Buick.
• Herb Chambers Companies, one of New England’s largest auto dealers, will be opening one of four Massachusetts Fiat dealerships this summer.
• Northtown Lexus has opened its new home in Amherst, N.Y., an $8 million project several years in the making.
• In Oklahoma, there were 26 dealers who did not renew their licenses with the Motor Vehicle Commission since 2009. But 10 new dealerships have sprung up, including several Hyundai stores, Fowler Volkswagen in Norman and a new Fiat dealership.
While I’m happy to see the industry recover, I worry that we might be getting ahead of ourselves. Take a look at this chart of new-car sales vs. franchise dealerships (dealership data is from NADA’s 2011 State of the Industry Report):
From 2000 to 2007, sales and dealership volume tracked closely. The gap widened considerably when sales plunged in 2008 and 2009. While new-car volume is back on the rise, might it be a bit premature to start opening more dealerships?
