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Auto & Truck Dealers 2017

Sales in Overdrive

• After setting a new, all-time light vehicle sales record of 17,470,659 units for 2015, the US auto market did it again for 2016, with a total of 17,539,052 light vehicles sold, although it was just 0.3% more than 2015.

• Despite the new record for 2016, the Big Three US automakers and Toyota all posted red numbers for the year: GM, -1.3%; Ford, -0.1%; FCA/Chrysler Group, -0.4%; and Toyota, -2.0%. Nissan had the biggest gain, at +5.4%.

• 2017 started slower than 2016, with a 1.9% decrease in January’s total units, compared to January 2016. The SAAR, or seasonally adjusted annualized sales rate, was 17.57 million units, aligning with J.D. Power’s prediction of 17.6 million units for 2017.

North American Automakers’ Production Schedule, Q1 2017

|Automaker |Percent* |Automaker |Percent* |

|Total |+2.7% |BMW |+4.5% |

|Kia |+67.9% |Toyota |-0.1% |

|Volkswagen |+38.3% |Honda |-0.5% |

|Hyundai |+16.2% |Ford |-4.6% |

|General Motors |+13.3% |Mazda |-5.8% |

|Subaru |+7.4% |Nissan |-6.6% |

|Mercedes |+6.7% |FCA/Chrysler Group |-7.1% |

WardsAuto, January 2017 *change YTD Q1 2017 vs. Q1 2016

Domestic Dealership Lead the Way

• According to the National Automobile Dealers Association’s (NADA) Average Dealership Profile, the average US dealership generated total sales of $54.27 million for the period, January–November 2016, a 3.4% increase over the same 2015 period.

• Of the four dealership categories in the Profile report, domestic dealerships had the largest increase, or +6.6%, with mass-market dealerships second, at +5.2%. Import dealerships had a small gain of +0.4% while luxury dealerships declined 5.0%.

• Total new vehicles sales for the average dealer for the January–November 2016 period increased 3.0%, with increases for domestic and mass-market dealerships, at 7.4% and 4.9%, respectively. Luxury dealerships declined 6.2% and import dealership, 0.8%.

Services, Parts & Body Shop Sales, by Dealership Type, Jan.–Nov. 2016

|Dealership Type |Total |% Change |

|Average of all dealerships |$6.32 M |+5.7% |

|Average: Domestic |$5.27 M |+8.3% |

|Average: Import |$7.59 M |+3.7% |

|Average: Luxury |$11.69 M |-3.2% |

|Average: Mass Market |$5.72 M |+8.1% |

National Automobile Dealers Association, December 2016

Ford F-Series Trucks Remain Stellar

• The Ford F-Series regained its premier position among truck brands during 2016, with a 5.2% increase to 820,799 units. The RAM pickup and the Toyota Tacoma had larger increases, at 8.7% and 6.7%, respectively, but sold many fewer units.

• Total 2016 truck sales increased 5.9%, with small/midsize models increasing a spectacular 25.5%, and full-size models a more modest 2.7%.

• The Ford F-Series continued its positive run into 2017, with January units increasing 12.5%, compared to January 2016. The Chevrolet Colorado also did very well during all of 2016, at +28.8%, and January 2017, at +16.4%.

Top 10 SUV Models, by Units Sold, 2016

|Model |Units |% Change |Model |Units |% Change |

|#1: Honda CR-V |357,335 |+3.4% |#6: Chevrolet Equinox |242,195 |-12.8% |

|#2: Toyota RAV4 |352,154 |+11.6% |#7: Jeep Grand Cherokee |212,273 |+8.1% |

|#3: Nissan Rogue |329,904 |+14.9% |#8: Jeep Cherokee |199,736 |-9.5% |

|#4: Ford Escape |307,069 |+0.2% |#9: Jeep Wrangler |191,774 |-5.2% |

|#5: Ford Explorer |248,507 |-0.3% |#10: Toyota Highlander |191,379 |+20.4% |

Good Car/Bad Car, January 2017

Marketing the Ride

• TV is clearly automakers and dealers’ most-valuable advertising medium, which was proven during Super Bowl LI when , which operates more than 60% of dealership Websites, reported an 83% increase in total visits.

• According to Autotrader, the Lexus LC500 had the highest increase in search traffic following Super Bowl ads, or 4,700%; followed by Buick Cascada, +4,175%; Alfa Romeo Giulia, +2,628%; Kia Niro, +789%; and Mercedes-Benz AMG GT, +673%.

• During December 2016, Chevrolet, Ford and Toyota were the top three broadcast TV primetime advertisers. Toyota and Ford were third and fourth in total ad minutes during NFL broadcasts and Kia, Honda, Chevrolet and Dodge were top-10 NBA advertisers.

Advertising Expense, by Dealership Type, Jan.–Nov. 2016

|Dealership Type |Total |% Change from 2015|Per New Retail |% Change from 2015|

| | | |Vehicle | |

|Average of all dealerships |$534,946 |+5.4% |$638 |+5.3% |

|Average: Domestic |$461,595 |+9.6% |$670 |+7.2% |

|Average: Import |$623,173 |+2.0% |$611 |+3.6% |

|Average: Luxury |$563,585 |-8.6% |$669 |+2.9% |

|Average: Mass Market |$532,434 |+7.4% |$634 |+5.7% |

National Automobile Dealers Association, December 2016

J.D. Power Performance Palette

• According to the J.D. Power 2016 Vehicle Dependability Study, the Buick Verano was first in the compact-car category, the Chevrolet Malibu was first in the midsize-car category and the Buick LaCrosse was first in the large-car category.

• J.D. Power’s 2016 U.S. Customer Service Index reported that owners ranked Audi first in dealer service satisfaction for luxury brands while MINI was first in mass-market brands, followed by Buick, GMC, Chevrolet and Hyundai.

• According to the J.D. Power 2016 U.S. Sales Satisfaction Index, 5 of the 10 dealership processes that relate to negotiating the deal had the greatest effect on sales satisfaction. These included providing straight answers and not pressuring customers.

J.D. Power Sales Satisfaction Index Rankings, Mass Market Brands, 2016

|Brand |Points* |Brand |Points* |

|#1: Buick |809 |BRAND AVERAGE |764 |

|#2: MINI |797 |#10: Honda |755 |

|#3: Chevrolet |789 |#11: Chrysler |750 |

|#4: GMC |786 |#12: Kia |747 |

|#5: Subaru |775 |#13: Mazda |742 |

|#6: Volkswagen |775 |#14: Hyundai |741 |

|#7: Ford |770 |#15: Jeep |750 |

|#8: Nissan |770 |#16: Dodge |738 |

|#9: Toyota |766 |#17: Ram |733 |

J.D. Power, November 2016 * on a scale of 1,000 points

Digital Directions

• At the 2017 Automotive News Retail Forum, Mark O’Neil, COO of Cox Automotive, said approximately 10% of “the auto industry’s transactions could be online by 2019.” AutoNation Express transacted 30% of its new-vehicle sales online during January 2017.

• According to a January 2017 Automotive News article, 10% to 20% of dealers have software that allows them to do an electronic vehicle transaction to the point of delivery, as some state laws require physically signed documents.

• Some dealers think a complete online transaction may still be years in the future because of the need to value a trade-in and process financing. Many are also fearful of losing finance and insurance profits, although purchases through iPads are popular.

Top-10 J.D. Power Automotive Mobile Website Rankings, 2016

|Brand |Points* |Brand |Points* |

|#1: Infiniti |805 |#6: Buick |797 |

|#2: Jeep |803 |#7: Chrysler |797 |

|#3: Dodge |801 |#8: GMC |792 |

|#4: Lincoln |801 |#9: Land Rover |792 |

|#5: Cadillac |798 |#10: Porsche |792 |

J.D. Power, November 2016 * on a scale of 1,000 points

Additional Analysis

According to comments from Scott Keogh, president of Audi of America, new electric vehicles are coming much sooner than many consumers and dealerships may be aware. Audi expects three new battery-electric vehicles (BEVs) available in the US by 2020, which are included in the 30 such vehicles the Volkswagen Group (Audi’s parent company) will bring to the US market by 2025.

Volkswagen is also committed to spending $2 billion to install public charging stations during the next 10 years. Keogh stated that the current 200-mile charging limit of the Chevrolet Bolt will quickly improve to 400 miles and even 500 miles in future electric-car models.

During his presentation, Keogh also encouraged Audi dealers to begin to plan for the necessary adjustments when servicing electric vehicles, as they will have approximately 20% fewer parts that will require replacement or repair. Savvy dealers will be able to offset the loss of service revenue by marketing home-charging installations to customers and other BEV services and products.

In a February 2017 WardsAuto interview with Gary Tucker, the former CEO of DealerRater, which recently acquired, he said the next stage in the evolution of consumers performing most of the car-buying process online will be choosing the salesperson at the dealership they plan to visit.

He said that this consumer-salesperson connection prior to the dealership visit will be critical because what kills a deal at the dealership is how potential customers are treated, not dissatisfaction with a particular brand or model. Dealership must also be prepared for consumers’ posted reviews that may focus on the salesperson first and the dealership second.

According to Tucker, a DealerRater survey found that 70% of customers who made a referral referred the salesperson. Although it may be possible that a salesperson with a long list of positive posted reviews could leave one dealership for another, it is incumbent on the dealership to create a facility and sales environment that ensures salespeople will want to remain there.

Sources: Good Car Bad Car Website, 2/17; Automotive News Website, 2/17; J.D. Power Website, 2/17; WardsAuto Website, 2/17; National Automobile Dealers Association Website, 2/17; 4C Website, 2/17.

Updated: February 2017

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