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Fewer points, more profit in 2010: DesRosiers

Though the overall dealer count dipped in 2010, the ones who remained sold more vehicles and increased net profit on average compared to ten years ago.

The information, released by industry analyst Dennis DesRosiers shows that in the wake of bankruptcy bombshells and the Great Recession, the margin on new vehicle dealer net profit rose to 2 per cent from 1.75 in 2009.

“Return on sales is arguably the most important metric for new vehicle dealers and for the first time in a number of years, it increased in 2010 rather than decreased,” DesRosiers wrote. “This brings the industry back to profitability levels of 2004.”

Total net profits across Canada’s new vehicle network jumped by 21.3 per cent while net profit per dealer increased by more than 24 per cent to $449,300.

DesRosiers says while the number may surprise some who would have expected a larger figure per dealer, it is important to remember there a lot of small dealers that sell less than 500 new and used combined per year.

“There are also brands as a whole that have little to no profitability at the dealer level and this biases the number down as well,” he adds.

Last year also saw a considerable improvement in new vehicle sales per dealer compared to 2009, rising 39 units to 467. On a per dealer average by manufacturer, General Motors saw the largest increase from 2009 rising to 535 units per dealer, a jump of 127 vehicles. Of course, GM did drop 159 dealers from the network, which helped with the average.

The other end of the spectrum saw Toyota plummet an average of 145 units per dealer to 641, though still good enough for second place. Lexus dropped 108 units per store.

A jump in the luxury market helped propel BMW to the podium for the top seller per store with 663 units. Ford, Hyundai and Mercedes-Benz rounded out the top five.

But as profits and total sales trending upward, Canada’s total network of stores declined by 80 last year.

No surprise that GM saw the biggest change from 2009 with 159 dealers losing their sign in the wake of the automaker’s restructuring. It is interesting to note, DesRosiers says, that of the 242 store closings GM announced in 2009, 83 were able to find another automaker or survive with a remaining GM brand (GMC, Chrevrolet, Buick and Cadillac).

Other OEMs that lost stores in 2010 included Suzuki down 10, smart down three and Ford down two.

Additions to the market included Kia with 12, Hyundai at 11 and Mitsubishi, which grew by seven stores.

For his analysis, DesRosiers treated the addition of Scion to the Canadian market as separate dealer points, though not all of the 45 additions are stand alone stores.

Primary luxury automakers added eight stores last year and 47 throughout the last decade. This growth in luxury stores is a trend DesRosiers describes as potentially “problematic” given that the market may not grow fast enough to accommodate the number of points.

“Last year was a great year for luxury sales, but the still only account for less than 10 per cent of the total market and haven’t really grown much as a per cent of the market over the last decade,” he says. “Over dealering is a serious issue in the market and these added luxury stores raise a red flag in my mind.”