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Automotive Retailing in 2016: The Dealer Perspective
Patrick Manzi Senior Economist June 3, 2016
Franchised new light vehicle dealers
• $862 Billion
2
Franchised new light vehicle dealers
• $862 billion
• 1,110,700 people
3
Franchised new light vehicle dealers
• $862 billion
• 1,110,700 people
• 17.7 million
4
Franchised new light vehicle dealers
• $862 billion
• 1,110,700 people
• 17.7 million
• April SAAR 17.32 million
5
Employment (Monthly non-farm employment change, in thousands, SA)
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
360
380
Mo
nth
ly N
on
-Far
m E
mp
loym
ent
Ch
ange
, Th
snd
s., S
A
2014 2015
Historical
Forecast
2016
F
We need more workers
0
1
2
3
4
5
6
7
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
NU
MB
ER O
F U
NEM
PLO
YED
PER
SON
S P
ER J
OB
OP
ENIN
G
We need more work
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
NU
MB
ER O
F EM
PLO
YED
PA
RT-
TIM
E FO
R E
CO
NO
MIC
R
EASO
NS
(TH
OU
SAN
DS)
0.00
20.00
40.00
60.00
80.00
100.00
120.00
2013 2014 2015 2016
OIL
WTI
, U.S
. $
Forecast
Historical
Oil markets
Gasoline & Diesel
$1.5
$2.0
$2.5
$3.0
$3.5
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
F
20
17
F
20
18
F
Historical Gasoline Foreast Gasoline
Forecast
Historical
$1.5
$2.0
$2.5
$3.0
$3.5
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
F
20
17
F
20
18
F
Historical Diesel Foreast Diesel
Forecast
Historical
Gasoline Price per Gallon, in U.S. $, FOB New York Harbor ULS No. 2 Diesel Price per Gallon, in U.S. $, FOB New York Harbor
2015 Cars Vs. Light Trucks (% of Total Light Vehicle Sales)
0%
10%
20%
30%
40%
50%
60%
56%
44%
Cars Light Trucks
2016 YTD Cars Vs. Light Trucks (% of Total Light Vehicle Sales)
0%
10%
20%
30%
40%
50%
60%
59%
41%
Cars Light Trucks
New vehicle forecast
17.7 17.5 17.1 16.7 16.7
0.374 0.387 0.382 0.371 0.365
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Nu
mb
er
of
Veh
icle
s So
ld, M
illio
ns
2018 2016 2014 2012 2010 2008 2006 2007 2005 2013 2009 2011 2017 2015 2019
Forecast Light Vehicle
Historical Light Vehicle
Forecast Heavy Duty
Historical Heavy Duty
13
2020
Used vehicle sales forecast (Number of motor vehicles sold, in millions)
0.0
10.0
20.0
30.0
40.0
50.0
2010 2011 2012 2013 2014 2015 2016 F 2017 F 2018 F
Private Party Used Car Dealers New Car Dealers
35.7 40.4
Used vehicle sales forecast (Number of motor vehicles sold, in millions)
0.0
10.0
20.0
30.0
40.0
50.0
2010 2011 2012 2013 2014 2015 2016 F 2017 F 2018 F
13.2 13.3 13.8 14.4 14.4 14.6 14.5 14.4 14.6
Private Party Used Car Dealers New Car Dealers
35.7 40.4
Vehicle Prices
Average transaction price
$24,000
$25,000
$26,000
$27,000
$28,000
$29,000
$30,000
$31,000
$32,000
$33,000
$34,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$33,420
Prices outpace wages
Wages Light Vehicles
2012 1.9% 0.8%
2013 2.1% 2.8%
2014 2.0% 2.7%
2015 1.9% 3.1%
Loan terms
45.0
55.0
65.0
75.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
NE
W V
EH
ICLE
LO
AN
TE
RM
S, M
ON
TH
S
Continuous improvement
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
AV
ER
AG
E A
GE
OF
TH
E U
S L
IGH
T V
EH
ICLE
F
LE
ET, Y
EA
RS
A bigger chunk
9
9.5
10
10.5
11
11.5
12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
AV
ERA
GE
MO
NTH
LY P
AYM
ENT
AS
SHA
RE
OF
MO
NTH
LY
PER
SON
AL
INC
OM
E, IN
FLA
TIO
N A
DJU
STED
, 20
09
$
Net equity position in 2005
31
Months
Net equity position in 2015
42
Months
Profitability
Profitability – then and now
2.0% 2.2%
6.6% 7.0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2006 2014
PR
E-TA
X N
ET P
RO
FIT
Average Top 10 Percent
25
Profitability
-1.9%
7.0%
-4%
-2%
0%
2%
4%
6%
8%
2014
PR
E-TA
X N
ET P
RO
FIT
Bottom 10 Percent Top 10 Percent
26
Efficient operations are key
• Customer Relationship Management
27
Efficient operations are key
• Customer Relationship Management
• Inventory
28
Efficient operations are key
• Customer Relationship Management
• Inventory
• Hours
29
Efficient operations are key
• Customer Relationship Management
• Inventory
• Hours
• Human Capital
30
Human Capital
• $3.8 million average annual dealer payroll
31
Human Capital
• $3.8 million average annual dealer payroll
• Human capital has returns, just like financial capital
32
Human Capital
• $3.8 million average annual dealer payroll
• Human capital has returns, just like financial capital
• Unlike financial capital humans have increasing returns to scale
33
Returns on human capital
$47,000
$48,000
$49,000
$50,000
$51,000
$52,000
$53,000
$54,000
$55,000
$56,000
$57,000
2011 2012 2013 2014
Ave
rage
An
nu
al W
age
No
n-M
anag
er P
osi
tio
ns,
N
om
inal
U.S
. $
34
Returns on human capital
$47,000
$48,000
$49,000
$50,000
$51,000
$52,000
$53,000
$54,000
$55,000
$56,000
$57,000
2011 2012 2013 2014
Ave
rage
An
nu
al W
age
No
n-M
anag
er P
osi
tio
ns,
N
om
inal
U.S
. $
CAGR 3.1%
35
Dealership employee productivity
$7,500
$7,600
$7,700
$7,800
$7,900
$8,000
$8,100
$8,200
$8,300
$8,400
$8,500
2011 2012 2013 2014
GR
OSS
PR
OFI
T P
ER E
MP
LOYE
E
CAGR 1.8%
36
• Employees have a return on human capital that is almost twice as high employers
37
Returns on human capital
Dealers pay more than the rest
38
$0
$200
$400
$600
$800
$1,000
$1,200
2011 2012 2013 2014
MED
IAN
WEE
KLY
WA
GE
Dealership Workforce Study US Median
Annual employee turnover
11%
16%
17%
23%
24%
26%
37%
39%
41%
72%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Parts Manager
General Manager/Operator
Parts Consultant
Service Manager
Service Technician
Sales Manager
F&I Manager
All Positions
Service Advisor/Writer
Sales Consultant
Annual Turnover, % of Labor Force
39
Median employee tenure
1.5
2.4
2.7
3
3.9
4
5.7
6.9
9.1
12.2
0 2 4 6 8 10 12 14
Sales Consultant
Service Advisor/Writer
All Positions
F&I Manager
Service Technician
Sales Manager
Parts Consultant
Service Manager
General Manager/Operator
Parts Manager
Years
40
Wage Growth
• Wages are rising at nearly twice the national average
41
Wage Growth
• Wages are rising at nearly twice the national average
• Wages are far higher than the national average over $10,000 year
42
Wage Growth
• Wages are rising at nearly twice the national average
• Wages are far higher than the national average over $10,000 a year
• Turnover is almost triple the national average
43
Wage Growth
• Wages are rising at nearly twice the national average
• Wages are far higher than the national average over $10,000 a year
• Turnover is almost triple the national average
• Tenure is less than ¼ the national average
44
Turnover of a top performer
45
10%
8%
12%
15%
20%
18%
23%
20%
31%
41%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Parts Manager
General Manager/Operator
Parts Consultant
Service Manager
Service Technician
Sales Manager
F&I Manager
All Positions
Service Advisor/Writer
Sales Consultant
Annual Turnover, % of Labor Force
Generational differences
• Millennials - 31% of employment 2014, up 4%
46
Generational Differences
• Millenials - 31% of employment 2014, up 4%
• Turnover higher among millennials
47
What do millennials want?
• Jobs that pay salaries
48
What do millennials want?
• Jobs that pay salaries
• They don’t want to work on commission
49
