June 1, 2004
The New Frontier
Vision and intellect were two strengths that African American auto dealers exploited to stay on the road of profitability in 2003. They drew strength not only from flexing the marketing muscle of a large body of store locations, but also from rethinking operational efficiency. Auto dealers had to think differently and incorporate new ideas to gain the maximum benefit from expenditures, customer relationships, and staff. In some cases, they shifted dollars from expensive advertising to in-house departments dedicated to keeping in touch with existing customers and welcoming new prospects to their businesses.
“On the surface, sales were good. The U.S. auto industry prolonged the best sales years in its history to five consecutive years,” notes Paul Taylor, chief economist at the National Automobile Dealers Association. And while 2003 surpassed any year prior to 1999, it yielded the slowest movement of products since that time. The 16.6 million vehicles sold in 2003 lagged behind the slightly speedier 2002 pace of 16.8 million, which itself had not matched the 17.1 million units sold in 2001 or the record-breaking 17.4 million units sold in 2000. An increase in sales was the result of a 43-year low in short-term interest rates and stronger customer enticements like cash incentives and low- or zero-percent-rate financing deals. Taylor says that the average customer incentive for lightweight vehicles in 2003 was $2,664.
While every other class of vehicle sold fewer products in 2003, two categories sold more. Crossover utility vehicle purchases jumped 34.7%. Unlike the traditional sports utility vehicles (SUVs) that are built like trucks, crossover utility vehicles are based on a car chassis. Gaining in popularity, crossovers such as the Chrysler Pacifica, Cadillac SRX, Volvo XC90, and 2004 Lexus RX330 (successor to the Lexus RX 300) have the SUV look, variable passenger compartments, and optional all-wheel drive. They also represent six out of 10 concept vehicles that Taylor says he has seen at auto shows. Pickup truck sales rose by 2.2%, boosted mainly in the second half of the year.
“Growth in pickup truck sales was important because it indicates that the business buyer is coming back to the market [and that] consumers [are] purchasing pickup trucks. Capital budgets are starting to be freed up by corporations to purchase pickup trucks. That was very good news because capital spending has been moderated considerably by weak economic conditions in the most recent years,” says Taylor.
“The overall economy’s gradual recovery was offset by dealers’ increased cost of doing business,” observes Judson B. Powell Jr., interim executive director of Ford Motors Minority Dealers Association. “The rebound brought inconsistent seesaw effects on sales,” says Marjorie Staten, executive director of General Motors Minority Dealers Association, an organization that is not affiliated with GM. General Motors remained No. 1 in U.S. auto sales.
“Consumer insecurity about the overall economy resulted in hesitancy to buy, while the amount of money that manufacturers put into stimulating new-car sales devastated the used-car market and cramped dealers’ ability to make trades,” notes Jesse Greathouse, president of the DaimlerChrysler Minority Dealer