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Auto dealers typically account for about 20% of a city's retail sales. Coupled with the long lifespan of a dealership and the difficulty in converting abandoned car lots it is important for a city to do its research when recruiting new dealerships. Often it is important to look at the national auto landscape to predict the long-term viability of a dealership. American manufacturers have typically been the first dealership into a town, but that is beginning to change due to recent problems in Detroit.
The American automotive landscape has dramatically changed over the past twenty years. The "Big Three" no longer dominate vehicle sales in the United States. Competition from Japan, Germany, and most recently South Korea has significantly reduced American manufacturers' market share. This outside competition has even lead to an infiltration in American auto manufacturing. Chrysler is now owned by the German auto giant Daimler. The most successful foreign manufacturer, Toyota, has eight manufacturing facilities in the United States. Hyundai's new plant in Alabama marks the first time a foreign company not from Japan or Germany has made vehicles in the United States. What has caused this loss of domestic domination in the American auto market?
The answer is simple, American manufacturers find themselves struggling in the three major automotive segments, cars, SUVs, and trucks.
Cars
Because of high profitability in SUVs and long term domination of the truck market, American manufacturers spent little of their resources over the past decade in maintaining competitive advantage in the car segment. Quality, reliability, safety, and value in the car segment are now the domain of foreign makes. With a shift from SUVs to cars in the past two years, the neglect of this segment has caused both General Motors and Ford to record large losses. While the SUV segment grew rapidly during this time, it never came close to eclipsing the car segment in terms of units sold. Foreign competitors such as Toyota, Honda, and BMW have taken full advantage of this fact and increased their market share significantly over the past decade.
SUVs
The 1990s witnessed the maturation of the SUV market. Cheap gas prices and model proliferation led these vehicles to be the most profitable segment for American auto makers. With the dramatic jump in gas prices over the past few years Americans have traded-in their large SUVs for cars and smaller SUVs. Unfortunately for American manufacturers, foreign automakers that joined the SUV race late, focused on smaller SUVs. This is the only portion of the SUV segment that continues to grow while it becomes harder for dealers to sell the once dominant full-sized American SUVs.
Trucks
The truck segment has always been heavily dominated by American manufacturers in the past. However the first true competition in the truck segment has arrived in America over the past five years. Toyota and Nissan have both had tremendous success by introducing full-sized trucks into the American market. Honda entered the truck market this year and early sales indicate that it too will become a factor in the segment.
The most recent models from Detroit indicate that American auto makers are attempting to stop the bleeding. The newest American sedans and sport coupes borrow styling cues and features from Asian and European models. Both General Motors and Ford are now offering the largest price cuts in their history in order to grab market share. However, it remains to be seen if a few new models and short-term price slashing will lead to long-term success.
When making an investment in money, space, and time for a new auto dealership it is important to understand its long-term potential for success in your community.
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Trouble in Detroit 
