Porreco investing in service facilities
<p><strong>Porreco investing in service facilities.</strong> </p>

WardsAuto Dealer 500 Sell 1.8 Million Vehicles

&ldquo;When we look at what&rsquo;s going on in our industry, it&rsquo;s fantastic,&rdquo; says NADA Chief Economist Steven Szakaly.

Record-breaking auto sales can’t last forever but WardsAuto Dealer 500 member Bernie Moreno puts it in perspective without getting too worried.

“The rate of growth is definitely going to be a lot smaller than it has been,” says the president of the Bernie Moreno Companies that has 28 franchises in four states, and three stores (No.41, No.243 and No.422) on the 2016 WardsAuto Dealer 500.

He notes auto sales went from about 10.6 million in 2009 (a terrible year) to 17.4 million in 2015 (a record year).

“It’s not going to go up 70% over the next five years,” he says. “I don’t know if that means sales have plateaued. As an industry, we can’t expect double-digit sales every year. I don’t know if I look at that from an alarmist perspective. We’re still selling cars at record paces. That’s good news.”

Collectively, the stores on the 2016 WardsAuto Dealer 500 generated $63.6 billion in total revenue in 2015, up from $62.6 billion in 2014.

That’s more than the 2014 revenues posted on the Inc. 5000 by the health ($21.8 billion), IT services ($19.3 billion) and financial services ($17.2 billion) industries. 

The dealerships on the 500 ranking sold 1,774,965 new and used vehicles last year compared with 1,780,308 last year.

Industrywide, 149 new U.S. dealerships opened in 2015, bringing the total number to 16,545, according to the National Automobile Dealers Assn.

Except for profit, which has been stalled at 2.2% for five years, dealer metrics measured by NADA pointed up in 2015. For example:

  • Total dealership revenue, including sales of new and used cars, parts and service, totaled $862 billion, up 6.9% from 2014.
  • Dealerships wrote more than 200 million repair orders and had more than $97 billion in service and parts sales.
  • The average selling price of a new car or light truck was $33,419, up 2.5% from 2014.
  • The average selling price of a used vehicle was $19,397, up 2.9% from 2014.
  • On average, 1,050 new vehicles were sold per dealership in 2015.
"It's fantastic," Szakaly says.

“When we look at what’s going on in our industry, it’s fantastic,” says NADA Chief Economist Steven Szakaly. “We are looking at seven years in a row of rising sales and revenue, an unprecedented period of time. Pent-up demand certainly has been met.”

Automotive trend trackers also look at vehicles per household. It fell in recent years.

“Now we’re up to the peak of 2.13,” Szakaly says. “That illustrates that households have basically re-stocked the motor vehicles that they either sold off or didn’t repair during the recession. 

“Having said that, I think we’re beginning to see sales plateauing, so the question now is: ‘Where are those sales going in the future and what are they going to look like?’ I think it’ll be stable around 17 million.”

WardsAuto predicts U.S. light-vehicles sales of 17.6 million units this year compared with 17.4 million last year. 

“The car business is very strong, our sales are up about 15%,” says Moreno.

The Penske Automotive Group is one of the largest groups on this year’s WardsAuto Dealer 500, with 54 dealerships ranging from No.8 Crevier BMW/MINI to No.484 Ferrari-Maserati of Central New Jersey. Overall, PAG has 179 franchises in the U.S. operating 139 dealerships in 19 states.

“The diversification provided by our business model continues to drive our business forward,” says Tony Pordon, PAG’s executive vice president-corporate development and investor relations.

“We continue to expand and enhance the company’s digital footprint through the designs, layouts and navigation of our websites,” he says.

That includes “increasing digital lead volume; driving higher reputation management ratings; and (offering) Preferred Purchase, PAG’s on-line buying tool which provides customers with choices on how they would like to research and purchase or lease a vehicle.”

Jason Porreco took over as owner and dealer principal of Bianchi Honda in Erie, PA, (No.367 on the WardsAuto Dealer 500) a year ago, after his father died. The 31-year-old says new-car sales in his market are slow at only a 2% to 3%t annual rate, but fixed operations are strong. That’s why Bianchi Honda is investing $2 million in its service department.

“Service demand has been increasing heavily over the past few years, so we’ve really begun to attack that area,” he says.

In a market with over more than new-car dealers, Porreco says Bianchi has a 20% share of sales. His store’s total revenue was $92.8 million with service contributing $3.8 million.

Big dealerships can have space problems, Durant says.

There’s never been a better time to be an auto dealer, says Bently Durant, chief operating officer and general counsel at Classic Chevrolet in Grapevine, TX, No. 4 on the 500 ranking with $413 million in total revenue and 8,389 new and used units sold in 2015.

Classic Chevrolet has claimed the most retail Chevrolet sales in the country for nine of the past 10 years. But size can have its downside.

“Size has always been one of the biggest challenges,” Durant says, who notes the store has expanded to the other side of the roadway because it ran out of room.

“I open up service every day with less than two free parking spots in the back lot,” Durant says. “I open every day with only a couple hundred free parking spots to shuffle cars around in. That’s not a lot when you have 2,000 vehicles on the property.”  

 

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