Car Dealers

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NEW AND USED AUTOMOTIVE INDUSTRY: AN INDUSTRY PROFILE sic # 5511

Ronald C. Rice, BBA University of Cincinnati College of Business Administration

Spring 1990

TABLE INDUSTRY AND BUSINESS ENVIRONMENT

CONTENTS

Trends Affecting the Industry.........................1 Current State of the Industry.........................3 The Legal Environment.................................4 Industry Problems.....................................4 Franchise Opportunities...............................6 Current Trends........................................6 New Technology........................................7 SMALL BUSINESS FACTORS Startup Information...................................8 Licensing.............................................9

http://www.sbaer.uca.edu/Publications/pub00033.txt

6/18/04

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Model of the Average Dealership.......................9 Financing.............................................11 Marketing.............................................12 Management............................................14 Business Plan.........................................14 CONCLUSION............................................16 REFERENCES............................................17 BIBLIOGRAPHY..........................................18 EXHIBITS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. U.S. Car Sales For Major Manufacturers (1973 - 1983) Number of Dealerships VS. Principles(1979 - 1989) Breakdown of Total Sales Net Profit as a % of Sales Gross Profit as a % of Sales Now Car Sales - Hamilton County Ohio "Sweat Mountain" News Break Stats Small and Average Size Dealership Organizational Charts Large Size Organizational Chart Market Share Growth of Imports Average Price of New Vehicles Sold Average Number of New Vehicles Sold per Dealership Sample Break-even Chart Operating profits Licensing Checklist

INDUSTRY AND BUSINESS ENVIRONMENT Trends Affecting the Industry The largest group of car buyers are the baby boomers, the age group currently between 25 and 43. According to predictions by the NADA they will buy 50% or more the new cars in the next two decades. It is estimated that by the year 2000 that baby boomers, will head over 60 million or 57% of all households in this country. The Project 2000 Committee estimates that, despite the rising costs of living, the dollars spent on new vehicles will increase from the 7.3% level of total household expenditures in 1960 to 11% in 1992. The greatest impact of this is that the baby boomers seem to prefer imports to domestic cars [SEE EXHIBIT 1]. In 1973, imports controlled 13.5% of the market. By 1983, that number had risen to nearly 26%. Current figures show the market share of imports to be over 32% and continuing to rise [SEE EXHIBITS 8 & 11]. This poses

http://www.sbaer.uca.edu/Publications/pub00033.txt

6/18/04

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a problem to the traditional dealer carrying only one domestic brand (i.e. Ford, Chevrolet, Chrysler, etc.). As a result, dealers, finding it increasingly harder to sell only one brand of automobile, are expanding to two or more dealerships or even operating several franchises from the same location. In their book, Betting on the Franchise, J. Ferran and Jake Kelderman suggest that dealers can expect the following trends to affect them: * Less impulse buying * Less response to novelty, change and variety * More focus on quality, durability and appropriateness * More trade-offs of time and convenience to get a good buy * Less store loyalty as the consumers seek to "beat the system" in the distribution area * More loyalty to a group of brands, but with selective behavior from product to product * More time and money scent at home * A pride in discipline and a willingness to forego present whims for future benefits * An increase in personal responsibility for making the right choice and less reliance on protection from government and others; and an emphasis an local products, brands and...
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