One of the first questions I get from my dealer clients is “How is everyone doing?” In 2012, many of our clients were frustrated that their sales and profitability lagged behind dealers in their “twenty group,” or the results as reported by Automotive News.
Vehicle sales increases in the Northeast definitely lagged behind those reflected in other areas in the U.S. New car and light truck sales were up 13% nationally in 2012 over 2011. However, the Massachusetts State Automobile Dealers Association reported that new car and light truck registrations only increased by 4.6% during the same period. Keep in mind that a 4.6% increase is an excellent year and almost all of our clients had strong profits in 2012.
There are a couple of reasons that the sales increases in Massachusetts are lagging the national trends. Traditionally, the Northeast enters an economic downturn sooner than other parts of the country. We also exit the downturn more quickly. Also, dealers in states such as Florida, Texas and California had drastic sales declines that exceeded those of Northeast Dealers as we entered the recession in 2008. For example, a dealer in Florida may have seen his/her sales decline from 100 units per month to 50 units per month at the start of the recession. A typical Northeast dealer would have seen a decline form 100 units to, let’s say, 75 units in the same period. By 2012, the Northeast dealer is probably selling 90 to 100 units per month. The Florida dealer has risen to maybe 90 units per month in 2012. The Florida dealer’s percentage increase has been dramatically higher than those of Northeast dealers in the past few years.
Another recent phenomenon is that many clients are seeing unusually volatile sales and profitability results month over month. As we review the financial results of our clients from 2012, only a handful of dealers reported consistent monthly performance. For example, a dealer might average $50,000 in monthly profitability but will report months in which they incur a loss, and have other months that they make in excess of $100,000.
In conclusion, we will continue to see volatility in reported results in 2013, and would expect that to continue in the near term. 2013 is shaping up to be another strong year for our dealers in the Northeast although, I would expect their vehicle sales growth to continue to lag behind growth reported on a national basis.
If you have any questions in regard to this article, please email Paul McGovern at PMcGovern@DowneyCoCPA.com.
