Total Number Of Car Dealerships: Is The Worst Over?

August 15, 2010

Almost one in five retail dollars spent in the U.S. comes from the auto industry. It’s no wonder that one of the hardest hit sectors during the economic downturn has been car dealers--on the front lines of retail sales during one of the most difficult economic periods in recent memory.

According to a recent story in the Wall Street Journal, the worst may be over for the ever-shrinking number of car dealers across the country. Just 258 dealers closed their doors during the first half of this year. That compares to 1,603 last year.

During any given year about one percent of car dealers go out of business for one reason or another. Last year--a time when General Motors and Chrysler went through bankruptcy--that number skyrocketed to eight percent. It’s easy to see a trend in the making when we hear experts predict that just two to three percent of car dealers will close by the end of this year. If true, the worst really is over.

Winners and Losers
I’ve filed a number of stories recently on the primary up-and-comer car maker in the auto industry: Hyundai. (See Hyundai Still Trying Harder to Win Customer Approval and Hyundai’s New Models: A Change for the Better.) Hyundai, along with Kia, VW, and BMW, actually increased the number of dealership across the U.S. last year. Sales for all four companies remain strong this year.

On the other side of the ledger, GM entered the economic slide with 6,049 dealers. That shrunk to the current 5,114 and is expected to be reduced to 4,500 by this fall. Chrysler started with about 3,000 dealers. This U.S. automaker is down to 2,315 and is expected to lose a few more by the end of next year. Ford plans to dissolve the Mercury brand, which may affect those dealers who operate Lincoln-Mercury outlets.

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