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Dude, where did all the dealerships go?
On the news tonight, they announced that here in California in October alone, 70 new car dealerships went out of business. That makes 97 for the year through October 31 in California. The latest here in the Bay Area was San Francisco Chrysler Dodge Jeep, which went belly up today. I bet the count for California is over 100 by now.
But it's certainly not limited to California. A quick Google search gets you hundreds of hits of news reports on dealerships closing all over the country. Here are just a couple....
Midlothian (Illinois?): http://www.suntimes.com/business/1286854,111908sunrise.article
Leonardtown, MD: http://www.newsweek.com/id/165378
And of course, the famous Bill Heard Chevrolet: http://jalopnik.com/5056225/exclusive-inside-the-fall-of-bill-heard-chevrolet-th- - - - - e-worlds-largest-chevy-dealership
NADA is initially estimating that some 700 will close this year, which would be 50% higher than last year, yet still seems to be underestimating the loss. Some think it might be much much higher...
Michael Jackson, CEO of the nation's largest dealer group, AutoNation Inc., estimates nearly 1,000 stores will close this year with another 1,000 closing in 2009.
Mark Rikess, an automotive retail consultant and analyst believes the industry will lose close to 2,500 dealerships by the end of 2009.
A study by Grant Thornton LLP Corporate Advisory and Restructuring Services concludes nearly 3,800 stores will have to close just for dealerships to maintain the industry's 2007 average of selling 750 units per dealership in 2009.
Some dealers tell Ward's they think nearly 8,000 dealerships could be wiped out. Watching that many dealerships disappear is unlikely, but the fact some dealers are thinking it describes the uncertainty many of them have regarding their survival.
So the question I have is whether this was ultimately inevitable, given that the ones closing up shop are almost exclusively domestic brands. GM has 7000 dealers and a market share of 22%. Toyota has 1200 dealers and a market share of what, high teens? Toyota has always said publicly that one of the keys to the strong health of its dealer body was the high per-store sales rate, and that it takes great pains not to allow stores to be too close together or infringe on each other.
Is this wave of dealership failures a favor in disguise for the domestic automakers? Or should these dealers be getting a taste of all this bailout money floating around? There were 20,700 dealers in this country at the start of the year, according to NADA. There may be 2000-4000 less by the end of 2009. Or perhaps we could lose even more than 4000. Should something be done, can something be done? Or do we sit back and let free market principles do their job, and add thousands and thousands of people to the unemployment rolls? What do you think?
2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)