International Auto Dealer's Assn.: 1998 Auto Industry Year in Review
16 December 1998
FOR IMMEDIATE RELEASE A YEAR-END LOOK AT THE EVENTS SHAPING THE AUTO INDUSTRY IN ?98 WASHINGTON, Dec. 10, 1998 -- 1998 will likely go down in history as a year of wide swings in automotive retailing, according to a feature story in the latest issue of AIADA's SHOWROOM magazine. Here is a look at the significant events which shaped this landmark year in the auto industry: Republic Industries: Republic Industries became the largest dealer group in the U.S. seemingly overnight. This confused everyone -- dealers and manufacturers alike -- resulting in a flurry of lawsuits. Manufacturers accepted that dealers should be able to sell their stores to public companies and that consolidation is going to happen. DaimlerChrysler: The merger between these two automakers caught the industry by surprise. "The merger has pushed the confusion meter back up this year," says Al Wagner, former senior vice president of dealer relations at Toyota Motor Sales, U.S.A., noting that dealers wonder what they will gain. "But the merger solidifies the fact that the auto industry has gone global." Auto Leasing: A few years ago when leasing was taking off, banks and finance companies placed residual levels sky-high. Now after two or three years, the industry is finding that these vehicles are not worth what they're supposed to be worth, and as a result the leasing business has slowed down. Auto Sales: Buying a car has been a good deal for consumers this year. The reason is two-fold: indiscriminate use of incentives and insane financing terms. "Before cars are in the showroom, some $2,000 in cash-back incentives are being advertised," Wagner told SHOWROOM. REITS: Despite the challenging capital markets, Capital Automotive REIT continued to grow steadily following its IPO in February. At the end of the third quarter, 75 percent of Capital Automotive's properties were located in the top 50 automotive markets, and 65 percent of its annualized revenues were derived from tenants who are among the top 100 dealer groups in the country. CarMax: 1998 has been a slow growth year for CarMax. The used car superstore had planned to open 15 to 20 stores annually, reaching 80 to 90 stores by 2001. But the profit picture has not been bright for CarMax. CarMax recently reached an agreement with Nissan Motor Co. to sell new Nissans at CarMax locations. Truck vs. Car Sales: November 1998 marked the first time since the end of World War II that trucks outsold cars in the U.S. Automakers -- especially GM and Ford -- have tilted their advertisements toward trucks and car ads have been scarce. "I think a lot of dealers are concerned about how they?re going to sell cars without national advertising support," Wagner told SHOWROOM. Auto Retailing and Wall Street: Auto retailing's status as a Wall Street darling was short-lived. The 12 retail groups that are publicly traded have ranged from highs of $39.50 to lows of $3.25 in the last year. "I think analysts are quite disillusioned about the industry's lack of sophistication and find the peaks and valleys confusing," says Wagner. Virtual Dealerships: There has been a great deal of concern among some auto retailers that online car-buying services will take sales away from the dealership. To combat this latest trend, analysts suggest dealers concentrate on training dealership personnel to meet the needs of the better-informed consumer. Despite all the twists and turns the industry has experienced this year, dealers have profited greatly, taking advantage of improved products and services and consumers have benefited from the incentives and great financing deals. For more information, see the November/December issue of AIADA's SHOWROOM magazine. To subscribe, call 1-800-GO-AIADA. SHOWROOM is the official publication of the American International Automobile Dealers Association (AIADA). AIADA is the trade association representing America's 10,000 retailers of international nameplate vehicles. The association works to preserve a free market for international automobiles in the U.S. by advocating this mission before the federal government and is dedicated to increasing public awareness of the international automobile industry's value to the American economy. ###