Retail

How Many of America's Nearly 17,000 Car Dealers Will Survive?

The most recent research shows that there are 16,682 franchised car dealerships in America. Last year, they sold just over 17.1 million cars, sport utility vehicles, crossovers and light pickups. Analysts believe that figure will drop as low as 13 million. If there is a large second wave of COVID-19 infections in the fall and winter, that number could go even lower. Hundreds of dealers likely will close.

The lowest annual car sales number in the past four decades was 10.4 billion in 2009, at the bottom of the Great Recession. General Motors cut 1,100 dealers then. Chrysler dropped 789, and other manufacturers close hundreds. There simply were not enough unit sales to support networks that had burgeoned over more than 30 years. The dealers that sold the fewest cars were the most likely to be shuttered.

It is too early to put an exact figure on how many dealers will close this year and next. In many cases, the car companies will not need to take action. Dealers will simply run out of money, as many other small businesses have.

What will the cost be to the car companies? It depends on car sales methods of the future. People are becoming accustomed to picking and even buying cars online. The dealers only deliver them. That raises the question of whether the sales departments of dealers are important at all. Dealers make much of their money on car servicing. If fear of contact persists, former dealer service departments could be combined into brand service centers. The dealer building could simply become obsolete.

Car dealerships may become something like restaurants. That is, they are places fewer people will go. And, places that become unnecessary will start to close down.