Rural Dealerships A Big Sales Advantage for Ford, GM, and Chrysler-Fiat

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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:

  1. GM has 4,400 dealerships across the USA
  2. 27% of these dealers are rural
  3. 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.

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  1. mk says:

    I agree to some degree. Around me, GM dealers are a dime a dozen in almost every small town over 1,000 population and can get anytime anywhere anything you want and shop around easier for the best deal. However, I know most of these local mom and pop dealers who survived the huge dealer closing in 2008/2009 are not selling more than 2-3 trucks per month and lucky to get 5-6 total vehicle sales per month is all. Yet 2 to 3 per dealer times 1,000 extra rural dealers do add up in 1 year. But, I would say for me anyways, I go to larger more urban dealers who have more in stock to move out to usually get the best money savings deals. For me, it is not about the local sale as much as driving say 100 miles one way to save 1,000’s more. For example, I saved near 3,000 dollars on my new 2012 tundra by going to 1 dealer over the other same can be said on our new then 2011 hyundai sante fe going to my local 30 mile away dealer first who was way off their rocker in terms of pricing and drove about 125 miles one way to go buy the santa fe sight unseen. I may be the odd ball, but price is more important than local convenience. Don’t get me wrong, I will shop at the local dealers, but always shop around at larger towns to get the best price.

    • MK,

      Until Jason wrote this article, I hadn’t ever really thought about rural dealers and what brands they sell. He is right though, thinking about the rural dealers I have seen they are mostly GM or Ford. I am guessing that while these dealership choices don’t influence every car rural car buyers choose, it does help having a local dealer. If I lived in a rural area and I knew there was a local GM/Ford dealer in town, I might be more likely to buy a GM/Ford with the thinking that I have a local dealer to fix my vehicle. If I bought a Toyota and I knew that it was 25, 50, 200 miles to a dealer for repairs, I might be less likely to buy one. Interesting topic/debate.

      -Tim

  2. Mickey says:

    I would and did drive further to have a better choice in vehicles when searching for what I want. Rural gave me the idea I wanted then internet gave the choice to go where it was.

  3. Thirdie @ Cargo Mats says:

    Well, I suppose Toyota should consider this rural dealership idea in their planning. As you very well presented the points about it, it’s not bad to take the risk and give it a try.

  4. SDD says:

    Living close to a rural dealer, I can tell you that those cars and trucks sit on lots for longer periods of time before they are actually sold.

    Strategically, if Toyota did start opening more rural dealers they would be opening themselves up for losses when the times get tough. Toyota dealerships in Canada for example are not small. They’ve got as many as 8-16 bays in some service shops.

    Personally, if I’ve been ripped off a few times by my local dealer, I’d happily drive 10-30 miles for regular servicing at another.

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