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The Fun Run Is Done

To see the 2003 Ward'sDealer 500, click HERE. It was a great streak while it's lasted. But now it is over. Going back to the early 1990s dealers on the Ward's Dealer Business 500 have posted overall gains from the previous year. In some of those years, the gains were huge. Consider this run: from 1997 to 2000, the average dealership on the ranking increased total revenue at least $10 million each

To see the 2003 Ward'sDealer 500, clickHERE.

It was a great streak while it's lasted. But now it is over. Going back to the early 1990s dealers on the Ward's Dealer Business 500 have posted overall gains from the previous year. In some of those years, the gains were huge.

Consider this run: from 1997 to 2000, the average dealership on the ranking increased total revenue at least $10 million each year.

In 2002, though, dealers on the list posted their first decline in total revenue from the previous year — from $62.4 billion in 2001 to $61.8 billion in 2002.

That represents 9.1% of all revenue generated by franchise automobile dealers in 2002. (According to data from the National Automobile Dealers Assn., total dealership revenue last year was $679 billion divided among about 22,500 stores.)

Despite the revenue drop last year, NADA Chief Economist Paul Taylor says the good years aren't over.

“This is a fiercely competitive market,” he says. “This competitiveness is helpful for dealers. A more competitive market creates more buyers. We certainly will see a year like 2000 again.”

However, new retail unit sales for dealers on the ranking decreased by 100,000, from 1.5 million to 1.4 million — good for 8.3% of last year's total sales of 16.8 million. That is down from 9.1% in 2002.

Says Taylor, “We did see a more conservative and picky buyer last year. We also saw more layoffs that are key to new car sales.

“We're in a time where, if I'm a dealer, I want to make sure I have the right models with the right colors.”

The revenue decline came from the new and used sales which combined for a drop of $1.1 billion. Increases in F&I revenue and service revenue help offset that somewhat. (See chart on page 26.)

Because of the aggressive incentives last year, the average transaction price for used vehicles dropped 2.1% notes Taylor.

While many dealers have felt the effects from a somewhat stagnant economy, other dealers continue to maintain a furious pace, refusing to succumb to adverse economic pressures.

Longo Toyota, for example, maintained its top spot, increasing its lead over the next closest dealership — Fletcher Jones Motor Cars in Irvine, CA — by $118 million.

The Greg Penske-run Longo in Southern California reported $554 million in total revenue — up from $536 million in 2001. The dealership increased in revenue in every area except for used car retail sales — which dropped by $4.5 million.

So far, Longo Toyota is the only dealership to report $500 million in revenue — and that's two years in a row now. But Fletcher Jones is getting close. “We're shooting for that $500 million level,” says Garth Blumenthal, general manager for the Mercedes store.

He believes the dealership can do it this year when including wholesale numbers. (For purposes of the Ward's 500, Ward's Dealer Business does not include fleet and wholesale numbers when compiling the ranking.)

Fletcher Jones reported $436.9 milllion in total revenue — an increase of $33 million over last year. Blumnethal, though, isn't content with that. Although Longo is far ahead, Blumenthal makes no secret of his desire to overtake that store.

“We're continuously looking for new ways to generate new business and new leads,” he says. This year the dealership is experimenting with new technology and processes that should help in the targeting and management of customers.

An aggressive attitude also helped propel Brown Automotive from 287th in 2001 to 251st in 2002. “We're always looking for opportunities,” says Rob Brown, vice president of the Toledo, OH-based dealership. “We were more aggressive with our parts operations. We established some more wholesale accounts and now have six trucks on the road.”

Brown also credits the Honda franchise and its certified used car program for the latest successes. “Overall, though, business has been pretty good for the last couple of years,” he notes.

There is one notable exception to this year's list. Ricart Automotive in Columbus, OH, which in some years topped the list, declined to submit information this year. A dealership spokesman says that's due to some acquisitions the group is making.

Mainstay Galpin Ford, owned by Burt Boeckmann, stays at No. 3, while JM Lexus jumps to fourth with a $50 million jump in revenue. Newcomer Ron Carter Automotive Center, owned by Cary Wilson, holds the fifth spot. The Alvin, TX-based dealership houses several franchises at one location.

Another familiar face, Major Chevrolet in Long Island, NY, is back on the list after a hiatus of a couple of years. At No. 6, the dealership reported $239 million in used car sales. The dealership has pushed General Motors pre-owned certified program with its customers and has focused on the used car part of the business.

Average Ward's 500 Dealership Made $123.7 Million

The average Ward's Dealer 500 dealership made $123.7 million in total revenue last year — down from $124.9 million in 2001.

In 2001, 301 franchises averaged better than $100 million in total revenue. That number decreased to 295 for last year.

Mercedes Benz franchises averaged $154.7 million, staying on top in that category for three years running now. But, average revenue for the luxury brand did decrease by $5.7 million from 2001.

The good news continues for Cadillac dealers. The domestic luxury dealerships averaged $132.1 million in total revenue — an increase of $18.4 million from last year. The jump came from new sales and service revenue and is the largest of any brand.

Lexus is another luxury brand whose dealers generated significantly more revenue in 2002. Average revenue for the import dealerships jumped $14.6 million to $136.7 million. Lexus dealers improved in every area of business, showing modest increases across the board.

The number of Honda dealers on the Ward's 500 jumped from 28 in 2001 to 40 last year. The Japanese brand robbed from the number of multi franchises which dropped to 63 last year — from 76 in 2001. Average revenue, though, decreased $10.4 million for Honda dealerships on the Ward's 500 — all from declines in new and used revenue.

Other brands with noticeable declines in total revenue from ‘01 include Nissan ($13.3 million); Buick ($10.8 million) and Ford ($7 million).

Go West!

The Western region continues to add to its total of dealerships on the Ward's 500 ranking. Usually, the number creeps up by two-four dealerships each year. But this year, the jump was sizeable — from 150 in 2001 to 160 in 2002. And it was Arizona, Utah and Washington that added to their totals. California's dealership total stayed the same as in 2001 at 87.

Dealership totals in the Southeast region also increased — from 140 to 147.

The Midwest region, meanwhile, lost 10 dealerships bringing its total to 56. And the Central region also lost stores dropping from 102 to 95.

The Northeast region, a model of consistency, maintained its total of 42 from last year. The total hasn't changed much from 1999 when the area had 38 of Ward's 500 dealerships.

The Western region also sports the highest average revenue per store. Carried by heavy weights such as Longo Toyota, Fletcher Jones Motor Cars and Galpin Ford, Western stores average $130.6 million.

TAGS: Dealers Retail
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