Auto and Truck Dealership Facilities
We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of auto and truck dealership businesses. Below is a brief synopsis of the industry.
Description of Business
Businesses include large facilities that sell new and used car and trucks.
General Industry Information
With revenues of approximately $1 trillion per year, the automotive retail industry is the largest retail trade sector in the United States. The majority of automotive retail sales in 2005 were generated by the approximately 21,500 U.S. franchised dealerships, producing revenues of approximately $700 billion. The industry is highly fragmented and largely privately held, with the publicly held automotive retail groups accounting for less than 10% of the total industry revenue.
Of the close to $700 billion in U.S. franchised dealer aggregate annual sales in 2005, new vehicle sales represent approximately 60% and used vehicle sales represent approximately 28%. In addition to new and used vehicles, dealerships offer a wide range of higher-margin products and services, including service and repair work, replacement parts, extended service contracts, and financing and credit insurance, which collectively represent the remaining 12% of total industry revenues.
According to industry data, the number of U.S. franchised dealerships has declined from approximately 24,000 in 1990 to approximately 21,500 today. Although significant consolidation has already taken place, the industry today remains highly fragmented, with more than 90% of the U.S. industry’s market share remaining in the hands of smaller regional and independent players. It is very probable that further consolidation in the industry is likely due to the increased capital requirements of dealerships, the limited number of acceptable alternative exit strategies for dealership owners, and the desire of several manufacturers to strengthen their brand identity by consolidating their franchised dealerships.
Red Flags and Risks
There are several risks inherent in the business of automotive retail. The first is the reliance on manufacturers to provide valuable inventory and advertisement to attract customers. Also, because it is a labor intensive industry, the threat of labor strikes could directly affect business. Weather and natural hazards also pose as a threat to the success of the industry.
The biggest risk to the car dealership industry comes from competition from other dealerships, and heavy regulations. Because many US manufactured automobiles are sold internationally, US dealerships are constantly subject to foreign trade risks. One of the more important risks is changes in international tax laws and treaties, including increases of withholding and other taxes on remittances and other payments by subsidiaries. Companies are also affected by exchange rates, currency valuation and changes in international government regulations. More recently, the economy has had a profound influence upon property and business values.
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