Rural Dealerships A Big Sales Advantage for Ford, GM, and Chrysler-Fiat
According to this Automotive News story, GM classifies 1200 of their dealers as “rural.” While the definition of rural is likely a little loose, here’s what we know about GM’s dealership operations:
- GM has 4,400 dealerships across the USA
- 27% of these dealers are rural
- Toyota has about 1200 dealerships across the USA, and a very small portion of them are rural (our sources say less than 10%)
Assuming that each of these 1200 rural GM dealership can sell either Chevy or GMC trucks, and assuming that each of these dealership can sell a measly 5 trucks per month, GM can generate about 70,000 truck sales in rural areas that Toyota can’t hope to match.
In other words, GM has a big sales volume advantage because of their extensive dealership network in rural areas. Ford – and to a lesser degree Chrysler-Fiat – enjoy this sales volume advantage as well. Here’s what it means to Tundra sales figures.
How Big is this “Big” Sales Advantage?
If 1,200 rural dealerships each sell an average of 5 trucks per month, that’s 70,000 rural truck sales that GM can tack on to their numbers. But is this 5 trucks per month sales average realistic?
Generally speaking, dealers like to stock 2 months of inventory. However, most GM dealers are currently stocking 3-4 months of inventory because GM has stopped truck production to get ready for the new 2014 model. Therefore, your average rural GM dealer is probably stocking 3 to 4 times as many trucks as they sell each month. Polling 5 rural dealers:
- Wright County Motors of Belmond, Iowa (population 2,348) stocks 24 new trucks. However, these are Rams, Fords, and Dodges, so we’ll use the two-month sales estimate and say this dealer sells 12 trucks per month. If we split this up amongst the different brands, 4 trucks a month is a reasonable estimate.
- Humboldt Motor Sales of Humboldt, Iowa (population of 4,683) is stocking 18 new Chevy and GMC trucks. That’s 9 per brand, or 3 truck sales a month (give or take).
- Larry Fannin Chevrolet-Buick-GMC of Morehead, Kentucky (population 6,897) is stocking 37 new Chevy and GMC trucks. Assuming 18 per brand, that’s 6 truck sales a month.
- Town & Country Car & Truck Center of Alamosa, Colorado (population 8,937) is stocking 19 new Chevy and GMC trucks. Assuming 9 per brand, that’s 3 trucks a month.
- Hellman Chevrolet Buick of Delta, Colorado (population 8,769) is stocking 22 new trucks, all Chevy. That’s 7 truck sales a month.
We find that rural dealers are likely selling 4 or 5 trucks a month.
However, even if we assume that these 1,200 dealers are selling 3 trucks a month, that’s an extra 40,000 truck sales that Toyota can’t match because they don’t have a local dealership. This is likely the same for Ford, and even Ram enjoys some of these benefits.
The point: Sales figures are misleading. Toyota is losing out on 20,000 – 50,000 Tundra sales a year because they don’t have a rural dealer network. If Toyota did have that network, the sales gap between the Tundra and the Ram 1500 would be much closer (especially if you toss out commercial fleet sales, as I’ve long argued).
What’s more, people who live in rural areas don’t always buy from their local dealership. Many times, they will drive to the nearest big city to buy, with the expectation that they will service their new truck at the local dealer.
In other words, this lack of a rural network hurt sales twice – once because the local dealers can’t sell the truck, and once again because there’s no local Toyota dealer to service the truck. As long as Toyota lacks a rural dealership network, they’re going to be at a significant sales disadvantage compared to GM, Ford, and Ram.
Filed Under: Tundra News