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Recovery of Retail Markets Remains Regionalized, Says CNW Research

June 23, 2009

While the national sales numbers are daunting, a regional look at the automotive retail environment tells a different story, CNW Research revealed in its year-over-year comparison of four used-vehicle markets — New York, New Orleans, Phoenix and Los Angeles — for the month of May.

While New Orleans showed improvement from its post-Hurricane Katrina economic slump by increasing volume by 19.49 percent and used-car market share by 18 percent, Phoenix remained in a used-car depression with sales falling more than 22 percent from May 2008 to May 2009.

And while the collapse of the housing market dented California’s automotive retail business, Los Angeles managed to increase its used sales by 3.48 percent, reflecting a growing number of potential new-car buyers jumping into the used-car market.

“While the national numbers are telling, looking at the used market by DMA reveals the nature of sales more clearly,” wrote CNW’s Art Spinella. “Generally, for example, the data clearly suggests that while Phoenix is suffering from continued economic turmoil, especially in the housing market, New Orleans is making tremendous gains as a place to see pre-owned vehicles. And for all the negative talk about California’s market collapse, Los Angeles is showing significant improvements versus 2008.”

Both franchised and independent dealerships increased sales in New Orleans and Los Angeles. However, in New York, independents gained the upper hand with a sales increase of 7.23 percent. Both franchised and independent dealerships continued to suffer in Phoenix with declines of 18.51 and 20.21 percent, respectively.

Transaction prices for franchised dealers increased above the national average of 2.22 percent in Los Angeles, New York and Phoenix. On the other hand, transaction prices for independent dealers fell from 6 to 8.6 percent in all four cities, as dealers had to discount heavily in order to move vehicles.

All four cities also showed gains in transaction prices for private party sales, which can be traced to a richer mix of vehicles, Spinella wrote.

In terms of floor traffic, New Orleans was the only city to experience an increase in shoppers at both its franchised (14.02 percent) and independent (3.90 percent) dealerships. Los Angeles franchised dealerships “drew nearly 17 percent more shoppers than a year ago, a possible indication that once used-car demand is sated, new vehicles will see the same increased interest,” Spinella wrote.

Additionally, there were significantly fewer buyers going outside of their home city in all four markets, while nationally there was a 21 percent decline in “cross-town” buyers.

The number of units financed increased in Los Angeles (16.84 percent), New Orleans (34.91 percent) and New York (8.13 percent), but declined in Phoenix (12.62 percent). The three improved cities also saw growing use of pre-approved loans, even though the number of subprime buyers dropped significantly.

“It’s common knowledge that the auto business is highly regionalized. California may suffer while Idaho booms,” wrote Spinella. “On the used-car side, four marketing areas — New York, New Orleans, Phoenix and Los Angeles — are examples of just how local conditions can generate different results.”

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