Oregon auto dealers see signs of a promising market, encouraged by local sales and national trends.
Automakers have boosted production, some forgoing usual summertime shutdowns to meet demand. Sales climbed in June, with the Detroit Three collectively reporting a 14 percent year-over-year increase and Japanese automakers posting double-digit growth as they reopen supply chains interrupted by the 2011 tsunami.
While consumer confidence has dropped for four straight months, buyers continue to stream into car lots, attracted in part by low interest rates.
The industry, experts say, is driving out of the downturn that halted production, detoured buyers and shuttered dealerships. And the upbeat frame of mind extends from Portland to Detroit.
"If you consider where we've been the last few years," Wilsonville auto dealer Parker Johnstone said recently, "we're very optimistic about what the economy holds."
Certainly, the industry has ground to gain. From 2006 through 2009, the passenger car market lost more than one-quarter of its value, falling to its lowest level since 1990.
Economists predict as many as 14.4 million new-car sales this year, the highest level in the U.S. since 2008. Oregon looks to grab 91,500 of those sales, a 24 percent jump from the market's recessionary low point in 2009.
Automakers' monthly sales point to a rebound from that year, when new-vehicle output declined by 5 million over a two-year span.
And they're making more cars, too. Auto production marked gains for six consecutive months before slipping in May. Production rebounded in June, with a gauge that tracks automotive products climbing 1.5 percent.
Manufacturers are boosting their payrolls to meet demand, adding 62,100 more workers between June 2011 and June 2012.
In Oregon, new-vehicle registrations climbed 9 percent during the first five months of 2012 compared with the same period in 2011. New car sales, excluding trucks, increased 13.3 percent during the same stretch. That easily outperformed the U.S. average of 9.6 percent.
"There were some very dark times over the past few years," said Greg Remensperger, executive vice president of the Oregon Automobile Dealers Association. "Business is picking back up again. I think our industry is going to lead the national recovery, as well as the local recovery."
That stands to boost the state's economy. The 240 new-car dealers have a measurable impact on Oregon's retail base, accounting for 12.4 percent of all sales in 2010.
It's also welcome news for the estimated 1,750 used-car dealers in the state, which are struggling to compete with franchised counterparts that grew their used-car businesses during the downturn. As demand for new cars increases, the reasoning goes, less room would remain on dealers' lots for pre-owned autos.
In 2010, new-car dealers sold 11.6 million new vehicles and 18 million used ones. And though the average price of new vehicles fell after 2008, the price of used wheels began to climb, in part, because inventory dropped.
Automakers manufactured fewer vehicles and drivers made do with current rides. The government's Cash for Clunkers program also weeded cars from the market.
The after-effects linger in Oregon today, as dealers see fewer late-model trade-ins and nicer used cars demand higher prices.
"It's Economics 101: supply and demand," said Gary Sargent, an auto industry veteran and president of the Oregon Independent Auto Dealers Association. "There's a large demand for used cars because it's what people can afford."
Thus, new-vehicle sellers say, used-auto sales remain an important income vein. And used-car dealers such as Portland's Tommy Wilson say it will take sustained new-car sales to resupply their inventories.
Sales rate doubles
Wilson has seen sales pick up this spring at his namesake Southwest Portland auto dealership. Its sell rate has doubled since the height of the recession and the dealership now turns out about 30 cars a month.
The business specializes in higher-end autos and commercial sales. The latter all but disappeared during the recession, Wilson said, forcing him to grow the retail segment.
Finding those cars proved difficult, as fewer rolled through the auction houses where he finds his cars. More buyers turned up, too, he said, all competing for 500 rather than 800 autos.
Because he specializes in higher-end cars, much of the competition he faces is from new-car dealers. But that will shift as new-car sales grow in the coming years, he said.
"We'll start seeing a few of those cars back at the sale only because of pure numbers," Wilson said. "They can only stock so many cars, or they have to get more property."
For now, used cars remain valuable, as they often afford sellers higher margins than new cars.
Medford-based Lithia Motors expects nearly twice the return this year on used versus new vehicles, forecasting margins of 14.6 percent for the former and 7.8 percent for the latter.
New CEO Bryan DeBoer, son of Chairman Sidney DeBoer, has said he plans to grow the used-car side. The public company is one of the largest auto sellers in the U.S., with 83 hubs in 11 states.
New-vehicle sales at stores open at least a year, a key measure, increased 25 percent during the first three months of the year, while the same metric for used cars climbed 18 percent. It forecasts 2012 sales of $2.9 billion to $3.1 billion.
On a local scale, Jim Fisher said he typically sells more used than new cars at his Portland Volvo franchise that borders West Burnside Street. Its inventory space is limited, so he targets later-model used Volvos that appeal to customers already interested in the European brand.
Overall, the dealership's sales remained largely flat the past couple of years. That's beginning to change, he said, but at a slower pace than East Coast counterparts.
Fisher cited Oregon's jobless rate, which at 8.5 percent is three-tenths of a percentage point above the national average. It's a gauge of the economy that weighs on consumer spending, he said. "We're slowly seeing an uptick, not marked improvement."
Beaverton's Herzog-Meier Auto Center has recorded three years of what partner Chris Meier described as steady growth. The dealership franchises Mazda, Mitsubishi, Volvo and Volkswagen vehicles. And as its new-car sales increase, its share of used-car sales is falling, he said.
"When the economy starts to improve the new cars are attractive," he said.
The dealership's payroll expanded in the past year to 125 people after contracting in 2007 and 2008, he said. It's also planning a multimillion-dollar upgrade, including a new Volvo building, by the close of 2013.
Dealers face pressure from manufacturers to meet their upkeep standards, especially as auto sales begin to pick up, said Remensperger, with the Oregon Auto Dealers Association. But as businesses show the first signs of recovery, required upgrades can be an expensive cost to shoulder, he said.
Ron Tonkin Dealerships is completing a major upgrade of its own, spending $5 million to renovate its Toyota and Mazda franchise along Southeast 122nd Avenue. It's in the process of securing permits for a $3 million upgrade to its nearby Chevy dealership as well, said Bradley Tonkin, vice president of his family's business. New-car business has picked up since 2009, and he expects the trend to continue, he said.
Yet necessity buying still defines the marketplace, said Dick Withnell, owner of a Hyundai and Dodge dealership in Salem. He called himself cautiously optimistic about the current market and said his own sales are ticking up.
But buyers are coming in with older cars; the average age of vehicles on the road now tops 11 years. That's changed the trade-in landscape, he said.
"You're not getting the 1-, 2- and 3-year-old trades anymore," Withnell said. "The challenge right now is to get the used cars."
Johnstone, whose Wilsonville Honda dealership borders Interstate 5, agreed. "Those cars are very difficult to find," he said, speaking from personal experience.
Johnstone hunted this spring for a late-'90s Honda sedan for his 17-year-old daughter, eventually buying a 1999 Civic.
His dealership's used-car sales account for 30 percent of its sales volume. Altogether, sales are up 47 percent compared with this time last year, surpassing its overall goals. "For us, it's just been absolutely wonderful," he said.
Sargent, the longtime auto dealer, struggled for years to compete with larger sellers. For him, the breaking point arrived when a $1,200 all-terrain vehicle his son sold at auction earned more profit than a $35,000 Chevrolet SSR he auctioned.
The business pivoted its focus to scooters, motorcycles and ATVs, a less-crowded marketplace in the Portland area. Son Gary Jr. helped secure franchise agreements with up-and-coming motorcycle manufacturers Hyosung and Kymco, meaning the veteran used-car dealer became a new seller. Now 90 percent of the dealership's sales are cycles, not cars.
"That's the key word right now for survival in the automotive and power-sports industry -- be diversified," the elder Sargent said.
Bob Lanphere Jr., who owns a handful of franchised dealerships in the metro area and others in Seattle, said more customers are coming to his stores and calling about cars.
Ultimately, growth in the auto industry will help the area economy as dealers boost employment, he said. "The recovery isn't near as fast as we want it to be, but it is recovering," Lanphere said.
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