How Auto Dealers Are Looking to Attack Profitability Concerns

Cars and Drivers

Published: January 27, 2017 12:55 pm

Last Updated: January 12, 2020 3:26 pm

Auto dealers are constantly under pressure to move cars off their lots, and profitably for this industry has always been a real concern. Even more problems arise when certain models aren’t selling as well as others. A recent meeting among major auto dealers in the United States yielded some insight into the concerns and problems that they currently are facing.

As a side note, the Trump administration’s primary focus is bringing jobs back to the United State, and the main avenue for this is through manufacturing companies. As part of this, Trump is meeting with auto producers like Ford Motor Co. (NYSE: F) or General Motors Co. (NYSE: GM) to move their factories and production back stateside. Although, this could have some unforeseen consequences within the industry and even downstream to the dealers.

More and more dealers are seeing shifting trends in U.S. auto sales. For one, compact cars and sedans are seemingly going out of style, at least for now. Crossovers, sport utility vehicles (SUVs) and trucks are taking their place, and this is what the American consumer is demanding.

Jim Morino, owner of Acura of Lynnwood in Washington, has commented that 2016 was rough and that sedan sales did not live up to expectations. At the same time, crossovers like the Acura MDX and RDX were in tight supply.

Morino further commented:

Profitability for Acura nationally overall is down. We’re down from where we were in 2015, and that is definitely a concern for dealers.

Mike Bowsher, owner of Carl Black Automotive Group in Kennesaw, Georgia, said that Chevrolet dealers were facing similar concerns. He mentioned that dealers ultimately want more trucks and crossovers:

I wouldn’t say we’re short. But with Colorado crew-cab trucks and full-size utilities, we all want more. Dealers are always screaming for that. For SUVs, I’ll take every one we can get. Diesels, too — we just can’t get enough.

Bowsher added:

All dealers care really about two things. First and foremost is franchise value, and second is dealership profitability.

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