Dealership Consolidation in a Changing Market

Abstract

Dealership Consolidation has been occurring basically since 1927 when the number of dealerships in the United States peaked at 53,125. This number has decreased to 17,700 dealerships as of 2011. This does not imply however that the auto industry has been decreasing over the last eighty-four years. On the contrary, more automakers have entered the market and sales for the most part have increased. It is a common occurrence that firms within a new industry grow quite rapidly. Once the industry reaches a certain· level of maturity, the number of firms will than decrease to a more productively efficient size. This is demonstrated through historical data of the automotive industry. This paper examines this decline in the number of dealerships and why responding to the market is ·good for the players involved. The changes in the market will be examined, as well as events that affected the automotive industry. There will be an emphasis on domestic automakers (Chrysler, General Motors, and Ford) with an in-depth look at one of Chrysler's projects. The consolidation of the general dealer network will be discussed, as well as the consolidation of multiple lines into one dealership, and the consolidation of many dealerships into large dealer groups. The automotive manufacturers, remaining dealers and consumers all benefit from these consolidations.