DETROIT -

The nation’s franchised dealer network has been stable for two straight years and appears poised for a third, and it will also likely hit another new-vehicle-sales-per-dealership record, according to Urban Science, which said new-car dealers have put “hundreds of things” into play to become more efficient.

The retail consulting firm released its 2012 Automotive Franchise Activity Report on Thursday morning and held a press conference to shed some light on the state of affairs for new-car dealers.

Overall, there were 17,851 franchised dealerships (defined here as rooftops) on Jan. 1, which was steady (0.5-percent uptick) from the Jan. 1, 2012 count of 17,767.

Urban Science vice president of retail channel solutions John Frith reinforced this strong sense of stability now being felt in the franchised dealer body.

In fact, Frith said during the press conference that when the net dealership change is broken down to a market level, “95 percent of the markets virtually had no change” in their dealership count, meaning they either increased or decreased by 1 percent or less.

“We’re back on a much more stable time period,” he said.

In fact, the dealer count should become even more stable in years to come.

“In the past, a 2-percent dealership annual decline was considered normal,” Frith said in a statement announcing the results. “But barring unexpected economic changes, network growth of 0.1 to 0.2 percent will become the new benchmark for the next few years.”

Urban Science also pointed out that individual dealer profitability has been impacted by this dealer count, due to the nature of the relationship between dealer count and throughput (the average number of new-vehicle sales per dealership.)

Throughput for 2012 came in at 812, a record high that was up 13 percent year-over-year.  This occurred on industry sales of 14.5 million.

Interestingly enough, the prior throughput record of 784 set in 2005 occurred with the industry having sold 17 million units that year.

So, while there were significantly less new-car sales in 2012 than in 2005 and there are fewer dealers, today’s dealers have been more efficient, Frith said Thursday. And that, he said, is what has driven dealer profits.

And when asked during the conference how exactly dealers have become more efficient, he said there have been “hundreds of things” they’ve done; for instance, using the Web to develop leads, putting more efficient sales processes in place, moving the customer through the process more efficiently and improving the customer experience.

But each dealer is different when it comes to the methods that have improved efficiency.

“It really is a dealer by dealer operational thing,” Frith said. Or, put a different way, it’s not a one-size-fits-all key change, he said.

Going forward, expect throughput to increase even more.

LMC Automotive is anticipating 2013 new-vehicles will hit 15 million. Should that happen, Urban Science says the throughput level will “shatter” the record set in 2012 and hit 839. Furthermore, the firm is projecting that the “normal” range will be in the 830s “for quite some time,” Frith said.

“If sales stabilize around 15 million, we expect the overall dealership count to remain relatively flat,” said Frith. “While there are fewer dealerships today than a decade ago, they are larger and should be able to easily manage the increased sales and throughput.

“We have a good balance of sales and stores, allowing for fewer incentives and increased dealership profitability; key reasons why it’s critical to maintain a right-sized network.”

During the press conference, he emphasized that Urban Science is seeing a healthy balance between the number of sales and the number of dealerships, but emphasized that “it’s really critical to maintain this balance.”
 

Joe Overby can be reached at joverby@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.