A Two Punch Combination Rock's the Industry
and Soon State and Local Government

New auto dealers in California are big business . . .  $82.3 billion in sales to be
exact in 2007.   But not all has been good for dealers.  A boxing analogy puts
into perspective.  The industry has been hit by a strong two punch combination.
The mortgage meltdown coupled with the spiraling costs of gasoline has brought
new car dealers to their knees.  And while they have struggled to get back up,
their potential customers have been impacted by the credit crunch.  Even with a
low prime rate, borrowers are confronted by some of the stiffest terms in recent
history.

Overview of New Auto Dealerships in California

Average sales per dealership...........................................................$51.6 million
Total sales of all new-vehicle dealerships in California ................... $82.3 billion
Dealership sales as % of total retail sales in the state....................18.9%
Estimated number of new-vehicle dealerships.................................1,594
Dealers provide thousands of well-paying jobs in California.
Total number of new-vehicle dealership employees in CA................133,721
Average number of employees per dealership..................................84
Average annual earnings of new-vehicle dealership employees.....$55,491
Dealership payroll as % of total state retail payroll..........................13.9%
Annual payroll of new-vehicle dealerships......................................$7.38 billion
Average annual payroll per new-vehicle dealership .......................$4.63 million
Dealers generate hundreds of millions of dollars of tax revenue
for state and local government through:
. Sales Tax Revenue
. Corporate Tax Revenue
. Payroll Tax Revenue

                                                                
                                            No More, but not impacting sales

Auto dealers in the Golden State have seen sales of new cars and light trucks
plummet by more than 18% in the first half of the year, according to figures from
the California New Car Dealers Association.

That's compared with a nationwide drop of 10%. Not counting sales to corporate
and government fleets, California dealers had sold 634,577 cars, SUVs, pickup
and minivans through June, versus 779,778 in the same period last year.
Here are a few other tidbits from the dealers’ association report:

•Toyota/Scion was the top-selling brand in the state, with a 22% market share,
 followed by Honda (12%) and Ford (11%). Another Japanese brand, Mitsubishi,
 came in last with a share of less than 1%.
•Domestic brands account for about 34% of new vehicle sales in California.
 Nationally, the Detroit Three capture 48% of sales.
• The top-selling models in the state were (in order) the Toyota Camry, the Honda
  Civic, the Toyota Corolla/Matrix, the Honda Accord and the Toyota Prius.
•The Ford F-series and Chevy Silverado were the top-selling full-sized pickups,
  easily fending off a challenge from the Toyota Tundra.
•Cars (as opposed to light trucks) have accounted for almost 60% of new vehicle
 sales in California, compared with around 54% nationwide

The California New Car Dealers Association in their most recent California Auto Outlook
identify two key factors for what they forecast as to be the reason for the continue decline
in sales, specifically a forecasted loss of 20 percent in sales for 2008.

•Number one roadblock to a rebound in new vehicle sales: Excessive household debt
•Number two roadblock to a rebound in new vehicle sales: Rising fuel prices and shifting
 consumer demand

                                         
                                       An example of a two punch combination

The Golden State’s lackluster sales will manifest themselves into less tax revenue for local
jurisdictions.  And unless the price of gasoline returns to the $80 to $100 a barrel, the transition
to smaller vehicles and specifically more fuel efficient vehicles will present a bind for the
manufacturers in the transition, causing further years of lackluster sales impacting local
governments who operate off of the life blood from the sales tax receipts created by new car
sales to also tumble.  Now who is driving California?

   
Tim Johnson
www.CaliforniaBusinessMinute.com