Auto dealers' ranks rise for first time in years

And then there were ... more. The number of U.S. auto dealerships grew in 2011 for the first time in years.

By Joseph Sczcesny, The Detroit BureauIt’s become a seeming fact of life that the number of U.S. auto dealers will steadily decline each year – with massive cuts during the industry’s recent downturn — but 2011 saw an unexpected turnaround with the dealer count actually rising for the first time in years.

New research also suggests that if the automotive recovery remains on track, 2012 could be the best year on record for American automotive retailers from a sales per showroom standpoint.

Research firm Urban Science reports the number of dealerships actually increased last year after two years of significant attrition. As of Dec. 31, 2011, there were 17,767 dealerships in the U.S., a 0.6 percent increase from 17,659 in 2010.

In a “normal” year, there is a 2 percent decline in the number of dealerships, making the rise quite significant, said Urban Science vice president John Frith.

The two largest contributors to the turnaround were Fiat, which added 135 dealerships in 2011, and Chrysler-Dodge-Jeep, which added 50 dealerships. Other OEMs also added retailers, but in smaller amounts.

On a state level, the largest increase occurred in California where 31 new dealers opened for business, In addition, New Jersey gained 10 dealerships while Ohio and Florida added nine each, and Texas added eight, according to Urban Science’s figures.

At the same time, there were a total of 29,380 franchises as of Dec. 31, 2011, a 2.4 percent decline from the 30,098 in 2010. This decline is attributed mostly to the final stages of phase-out of Ford Motor Co.’s Mercury brand last year.

(The majority of dealers now represent two or more brands, which is why there are more franchises than dealerships.)

“We have a stabilized, right-sized dealership network that has increased year-over-year for only the second time since we started this census,” said Frith. “Automakers and dealers are in a good, profitable position. To maintain that momentum and keep profitability high, they will need to resist the urge to abandon the expense controls and processes instituted the past few years.”

Based on 2011 vehicle sales of 12.8 million, Urban Science’s analysis of throughput — the average number of sales per dealership — increased approximately 10 percent year-over-year to 719 in 2011, compared with 659 in 2010.

Urban Science estimates that if vehicle sales reach 14 million sales in 2012, average sales per dealer could reach an all-time high, pushing past the old record of 784 set in 2005.

“This year, the key issue for many dealers will be figuring out how to handle a continuing sales influx,” added Frith. “This will shift more focus on ensuring that dealerships are meeting the automakers’ standards for staff, space, facility upgrades, policies and procedures.”