Wednesday, June 20, 2007

Autoblog On The Cost Of Having Too Many Dealerships

Autoblog recently highlighted one cost disadvantage domestic manufacturers have that relates to having too many dealerships relative to their competitors. Some of the numbers are striking. Autoblog reports:

  • "The three US carmakers have 15,741 dealers between them, while the Japanese carmakers have less than 4,000."
  • "Domestic dealers, on average, sell less than half as many vehicles per store annually than a Japanese brand dealer, and most sell far less than that."
  • "A new study by CNW Marketing Research has now tried to quantify the dollar cost [of excess dealerships] and come up with $3.9 billion, or $436 per vehicle."

So why not just reduce the number of dealers? Apparently, franchise laws make it nearly impossible to close a dealership unless the owner agrees. So, the Big 3 probably either have to live with this situation or pay the dealers to close. And the latter seems an unlikely outcome for any meaningful number of dealerships.

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