A Hot Time in Phoenix

If Phoenix is a barometer, new-car prices are returning to levels not seen in a decade or more. In a town where 120-degree summer days are par for the course, that's a hot mark. That was this columnist's impression on a visit to the fast-growing Arizona metropolis where almost every major dealer group operates on a seven-day-a-week basis and competition is as fierce as the desert coyotes howling in

If Phoenix is a barometer, new-car prices are returning to levels not seen in a decade or more. In a town where 120-degree summer days are par for the course, that's a hot mark.

That was this columnist's impression on a visit to the fast-growing Arizona metropolis where almost every major dealer group operates on a seven-day-a-week basis and competition is as fierce as the desert coyotes howling in the night.

The dealers howl, too, in screamer ads that attest to the quickly sprouting Valley of the Sun, now populated by nearly four million people. So keen is the competitiveness that the screamer four-color ads that decorate Sunday newspapers elsewhere run daily in the Arizona Republic.

It would be wrong to assert that Phoenix' downward price trend is exclusive to the Arizona capital. But the town's dealers are a feisty bunch, savoring the fact that Phoenix now surpasses Atlanta in new-home construction and often outstrips Las Vegas in monthly population growth.

Not to mention the rising number of “snowbirds” wintering in a city that boasts more “sun days” every year than any other metropolitan area in the country.

There are about 160 franchised dealers in Phoenix, not much considering the pyramiding market that multiplies every winter by long-term vacationers from the East and Midwest.

Whoever foresaw Phoenix as a land of opportunity for new-car dealerships, and many pioneers did so, somehow made sure they landed growth franchises and locations.

Cecil and Larry Van Tuyl, John Chapman, Bob and John Lund, Tex and Hal Earnhardt and Lou Grubb all invested and reinvested from early franchises as the population grew.

Of the privately owned groups, the Van Tuyls were the most aggressive in Phoenix. Cecil, 76, and son Larry, 54, latched on to the Toyota, Honda and Datsun franchises in the early 1970s on busy Camelback Road. Camelback Toyota, ABC Nissan and Showcase Honda became the wellspring of the Van Tuyls' Arizona operation that accounts for 12 of their 55 U.S. stores.

“We had next to no competition back then,” Cecil recalls. “It was an outpost, one franchise per brand.”

Ask a dealer in any other metro market how business would be with one or two competitors in the same brand. Chicago's sprawling market has 70 Chevy and 70 Ford stores alone. Phoenix and Las Vegas have mushroomed with a half-dozen or so of each, and the same ratio applies to such “growth brands” as Toyota and Honda.

In the sales-per-dealer department, Phoenix has no equal and the relative paucity of stores leads in turn to higher grosses and margins per-vehicle. Those support price-leader offers of new cars at $6,000 or less on clear-out specials.

Which is not to throw stones at Phoenix dealers, but to explain another phenomenon: Phoenix as a “dealer-destination” city with new buildings as spacious and aesthetic as anywhere.

Setting the pace is UnitedAuto Group's 11-brand North Scottsdale mall, a $100 million complex of modernistic dealership buildings specializing in luxury vehicles. The Penske Racing Museum, a restaurant, a Hertz rental outlet and a test track are on the 40-acre site. Each dealership has ample service bays, a pro shop for jackets and souvenirs, display turntables outside and in, comfortable furniture and top-notch employees.

“The museum alone has brought in more than 50,000 visitors,” says Tony Pordon, a UAG vice president.

There are numerous other dealership malls in the U.S. Another one concentrating on luxury cars is Asbury Automotive's nine-brand collection outside of St. Louis.

But none has buildings as commodious as UAG's. It has become so attractive that, across the street, Schumacher Mercedes-Benz dealership is building a new structure along similar contemporary architectural lines.

Whether higher margins and grosses automatically emerge from brand-new dealership building is debatable, but thousands upon thousands of visitors can't hurt — and may even take the place of $5,000-$6,000 new cars as drawing cards.

To think that travel agents are listing the North Scottsdale auto mall as a tourist destination is almost unimaginable. But then so are Phoenix' $5,995 new cars!

Mac Gordon is the dean of U.S. automotive writers. He can be reached at [email protected].

TAGS: Dealers Retail
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