Posted by: John Tozzi on December 5, 2008
I’ve been mulling the consequences of the auto industry’s troubles on small businesses. One thing seems pretty clear: whatever happens with the bailout, we’re going to see fewer car dealers in the next few years. Of the roughly 50,000 small businesses that depend on the auto sector in the US, about half of them are new car dealers. (Caveat: this is from Census data that measures establishments, not necessarily all distinct firms, so the numbers are rough.)
The National Automobile Dealers Association (whose acronym NADA strikes me as unfortunate, given the industry’s situation) has made the case for the dealers before Congress.
But even in a typical year, there’s a net loss of 75 to 150 dealerships, according to this CNN story from October. At that point, NADA predicted that 500 to 700 could close this year.
Now, obviously that’s less devastating than what will happen if Chrysler or GM go bankrupt. But the point is that even with a likely Big Three bailout, plenty of struggling car dealers will disappear, as consumers hold off on buying new cars and the credit crunch makes it hard for what buyers are left to finance.
Which dealers survive will probably have a lot to do with local economic conditions. But for some more thought on what dealers can do, check out this essay on the car buying experience. It’s worth a read for anyone interested in customer experience, regardless of what industry you’re in.