New Car Dealerships Increase in U.S.

The number of new car dealers in the U.S. rose slightly in the first half of 2011, as the auto industry expanded in metropolitan areas, according to a report released Wednesday by Detroit-based Urban Science.

The increase — amounting to just 0.4 percent, with the addition of 66 dealers for a total of 17,725 across the U.S. — is the first reported uptick in a decade, the global retail consulting firm said. The increase represents the end of a series of precipitous declines in dealers in recent years after the bankruptcies of two U.S. automakers and the shedding of numerous brands, according to The Detroit News.

The firm said the number of metropolitan-area dealers increased by 0.7 percent, while dealerships in rural areas fell by 0.5 percent. About 13,500 of the dealers are in metropolitan or urban areas, with 4,200 in rural areas.

"The small but unusual bump in the number of dealerships can be attributed to market corrections as the automakers rearrange stores following a couple tumultuous years of network consolidation and dealership bankruptcies," said John Frith, vice president of retail channel solutions at Urban Science.

The dealer network in Metro Detroit was flat for the first half of 2011: 229 dealers, down one from Jan. 1.

The report, which covers Detroit's Big Three and all foreign automakers, also reported an increase in average sales per dealer, suggesting dealers are in financially stronger positions than they were at the close of 2010.

Average sales at dealerships have risen to 711 per dealership, an increase from 656 vehicle sales per dealership in December 2010.

Automakers have reported that a higher percentage of their dealers are profitable.

While the number of dealers went up, the number of franchises — the brands that a dealership carries — had decreased by 729 as of July 1, bringing that total to 29,360. Most dealers — 57 percent — have just one franchise at a dealership.

Urban Science said the decline in franchises is due largely to the wind-down of Ford Motor Co.'s Mercury brand at Lincoln dealerships.

This dip in franchises represents a major stabilization of the industry, following the closure of 4,897 franchises since 2009.

Paul Taylor, chief economist for the National Automobile Dealers Association, said dealers are seeing better financial performance — and noted new Fiat and Mahindra dealers will be selling cars soon.

"We will see a world in which there are more brands from a greater array of countries for sale in the United States," Taylor said. "New brands will be more important as they set up dealerships with new light vehicles from manufacturers in China, India, Italy and elsewhere who were not recent suppliers a year ago."

The U.S. had 20,000 dealers as of 2008, and has shed about 11 percent since then. Much of that reduction came as General Motors and Chrysler used their 2009 bankruptcy restructurings to shed hundreds of dealers.

Some automakers are trying to re-establish some dealerships in urban areas in places like California. High land prices and the shift of people to suburbs have resulted in some major metro areas having fewer dealers than automakers would like.