News Column

Destination: Car Lot

June 2005, HISPANIC BUSINESS Magazine

Joel Russell

carlot

For car dealers, 2004 "was another good year, but without significant improvement from the previous year," says Paul Taylor, chief economist at the National Automobile Dealers Association (NADA). According to data from NADA, the average car dealer reported total revenue gains of 2.2 percent.

Against that backdrop, the Burt Automotive Network, the number 2 company on the Hispanic Business 500 and the largest car dealer on the directory, increased revenues 18 percent. CEO Lloyd Chavez Jr. attributes much of that gain to the opening of new stores. "We've been expanding over the last several years, and now some of that expansion is kicking in," he says. "We have a Ford and a Chevrolet dealership in a new part of Denver area, a suburb called Parker. It's a 120-acre auto complex we are developing, and as time goes on, we'll add other franchises, starting with Chrysler-Jeep."

"We have bought a couple of new dealerships and they are starting to get normal, average sales volume," says Ernesto Ancira, CEO of San Antonio-based Ancira Enterprises, number 8 on the Hispanic Business 500. "Actually, the auto business has been sluggish. Mostly new sales come from new stores."

All the largest car dealers on the Hispanic Business 500 follow the "superstore" approach by putting several auto franchises next to each other. "The key element is to become a one-stop shop for the transportation needs of their customer base," says Mr. Taylor. "Often that means several franchises co-located. It may mean pooling the used cars onto one lot, and providing an efficient service and parts operation."

Burt's Parker expansion offers a textbook example. "We are committed to adding import dealerships to our portfolio, and that's what we'll do in Parker," says Mr. Chavez. He estimates Parker is growing twice as fast as the Denver metro market.

Both Burt and Ancira increased fleet sales in 2004. Mr. Ancira attributes the gain to pent-up demand that materialized as the economy improved last year. Burt's institutional clients include car-rental giant Cendant, plus Comcast, Coors, and Qwest. "We're going after other large national organizations," Mr. Chavez explains, "because it tends to spread out our business across the country instead of depending on the local Denver economy."

He credits incentives from Ford and General Motors with keeping the U.S. economy out of a deep recession in 2001-03, but rising interest rates this year will add to the cost of buying a car as well as the cost for dealers. In a business where NADA estimates the average pre-tax profit margin at 1.7 percent, every little bit counts.



Source: HISPANIC BUSINESS Magazine


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