Firms will shift to new business models and online car shopping to spur growth
Los Angeles, CA (PRWEB) March 01, 2012
Following years of volatile revenue, the New Car Dealers industry is expected to expand in 2012. The industry is vulnerable to economic shifts, given its dependency on employment rates, overall consumer spending, financing rates and home values. In 2011, the tsunami and earthquake in Japan adversely affected the industry by reducing vehicle supply at dealers selling vehicles made in Japan or containing parts made there. “However,” says IBISWorld industry analyst Radia Amari, “supply levels are expected to return to normal levels in 2012.
Over the past five years, revenue for the New Car Dealers industry is expected to decrease at an average annual rate of 4.9% to $510.0 billion in 2012. However, this decline has not been constant. Revenue dropped in 2008 and 2009 because of the recession, which created high unemployment and low consumer confidence, resulting in sharply lower vehicle sales despite a federal trade-in rebate program (informally called Cash for Clunkers) that drove 700,000 new vehicle sales. In 2009, General Motors and Chrysler filed for Chapter 11 bankruptcy, which contributed to a decline in dealerships and reduced revenue. In 2010, however, industry revenue expanded as the economy began to recover and disposable income returned to growth. Revenue in 2012 is anticipated to grow as employment strengthens and disposable incomes rise. With increased discretionary spending and elevated confidence, consumers will pursue large purchases like new vehicles.
Over the next five years, IBISWorld expects industry revenue to grow due to higher consumer confidence and disposable income, which will drive increased demand for cars and trucks. Similarly, the introduction of new energy-efficient vehicle models will boost sales as consumers move away from high-gasoline consuming vehicles. These new models, however, will face stricter government regulation in relation to emission and fuel standards, which will raise selling prices.
Structural changes will also expand revenue. The industry will remain highly fragmented, characterized by a large number of small operators. Though consolidation has increased over the past five years, no company holds a significant share of the market. Industry players will expand their parts and repair service segments, which generate a significant portion of dealer profit. More vehicle sales will move online, which will cause underperforming dealers to close. For more information, visit IBISWorld’s New Car Dealers report in the US industry page.
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IBISWorld industry Report Key Topics
Companies in this industry sell both new and used passenger vehicles. Vehicles include passenger cars, light trucks, sport utility vehicles (SUVs) and passenger vans. New car dealers also provide parts and repair services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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