Auto sales up in state, bucking national trend

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BY MATT OLBERDING/Lincoln Journal Star

Automobile sales in Nebraska are on the rise, bucking a national trend.

Through May, the most recent month available from the Nebraska Department of Revenue, taxable motor vehicle sales were up nearly 9 percent, from $1.17 billion to $1.27 billion.

That follows a 2007 in which taxable automobile sales rose to $2.9 billion from $2.66 billion in 2006, also a 9 percent increase and the highest annual total since 2002.

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The closed Suzuki Auto Plex at 6401 N 28th still sits empty. While automobile sales in Nebraska are up, many small dealerships still face hardships. (EVA BARAJAS/Lincoln Journal Star)

The closed Suzuki Auto Plex at 6401 N 28th still sits empty. While automobile sales in Nebraska are up, many small dealerships still face hardships. (EVA BARAJAS/Lincoln Journal Star)

Those numbers are in stark contrast to national figures that show sales down more than 11 percent so far this year.

Creighton University economist Ernie Goss said Nebraska’s strong automobile sales are likely due to growth in industries such as agriculture and health care offsetting industries like homebuilding.

“In Nebraska, the positives of the growing sectors have more than offset the negatives of the waning industries.” Goss said.  “Rapid growth in farm income and in exports for crop producers has meant increases in the purchase of agriculture equipment and other transportation equipment for farms, including autos and trucks.“

Eric Thompson, director of the Bureau of Business Research at University of Nebraska-Lincoln, agreed that a strong agricultural economy is a big reason for the sales increase in Nebraska. But he also said there is pent-up demand among the general public as well.

Nebraska experienced several down years for automobile sales in the early and mid-2000s, “and there’s sort of a limit to how far people can go before replacing older vehicles,” Thompson said.

Because of that and other factors, such as a less severe downturn in Nebraska housing compared to other states, the Bureau of Business Research is predicting at least a couple more years of strong automobile sales.

In the June issue of its research publication, “Business in Nebraska,” the bureau predicted taxable motor vehicle sales in the state would grow to $3.04 billion this year, $3.14 billion in 2009 and $3.15 billion in 2010.

The strong numbers have people in the automobile industry cautiously optimistic.

Loy Todd, president and general counsel of the Nebraska New Car & Truck Association, agreed with Goss and Thompson that a strong ag economy has been good news for the dealers he represents.

“What you are seeing in part in Nebraska, with the agricultural economy being good, there’s some pent-up demand being met, and our dealers are still selling vehicles,” Todd said.

People in agriculture are still buying big trucks and sport-utility vehicles because that’s what they need, Todd said. But he said there’s definitely been a change in buying patterns for other consumers.

“There was a sea change that took place when gas hit $4,” he said.

And it will take awhile for manufacturers and dealers to catch up with demand for small cars, Todd said.

Honda, more than any other car manufacturer, stuck with smaller cars and eschewed big trucks and SUVs, said Eric Olson, general manager of Lincoln’s Williamson Honda.

But even Honda can’t keep up with demand for small, fuel-efficient cars.

“Our next 10 Fits that come in are sold,” said Olson, speaking of Honda’s smallest car model.

Olson said the demand for small cars has helped lead to a 35 percent sales increase at Williamson this year, even though sales of the Ridgeline truck and some of Honda’s bigger SUVs have declined.

“I think the market has shifted to this style of buying, and I don’t think it’s going to change,” he said.

Tony Holechek, general manager of Anderson Ford Lincoln Mercury Mazda in Lincoln, said he’s definitely seen a change in buying habits.

Though there’s been some loyal buying of trucks and sport-utility vehicles by farmers, sales of those vehicles overall are way down, he said, while sales of smaller cars are way up.

Holechek said sales of the Mazda brand, which like Honda is known for small cars, are up 20 percent this year, helping propel Anderson to a small sales gain over last year.

“More and more people are trading in big trucks for smaller cars,” he said.

While large dealerships with multiple brands appear to be adjusting to the new buying trends, some dealers are having trouble.

Bill Jackson, executive director of the Nebraska Motor Vehicle Industry Licensing Board, said car dealers, especially small ones, are going out of business at an alarming rate.

Jackson said figures from his office show about 200 fewer dealers in the state compared with the same time a year ago.

“That’s the first time in recent history when we don’t have a growth in dealers,” Jackson said.

That decline has been evident in Lincoln in recent months, with a couple of dealers going out of business.

In July, Suzuki Auto Plex surrendered its license to the state after several consumer complaints.

Owner Chad Gutschow had indicated then that he planned to sell the dealership to his father, who would relicense it and reopen it, but that apparently never happened.

Jackson said Gutschow, who had said he still planned to sell used cars under a different license, recently had that license revoked for failing to operate.

The dealership now sits empty, and a spokeswoman for American Suzuki Motor Corporation said the company is seeking a new dealer in the Lincoln area.

Jackson said that Gutschow had indicated financial difficulties had played a role in his problems at Suzuki Auto Plex

Another used car business, Cool Cars at 137 O St., recently had its license revoked for failing to post a required $50,000 surety bond, Jackson said.

He said he doesn’t know if financial issues played a role, but said he worries that more dealerships could go under if the economy continues to struggle.

“I’m very concerned that this is something that’s going to continue until things get better,” Jackson said.

The National Automobile Dealers Association reported there were 20,700 new car dealerships nationwide as of Jan.1, 2008. That’s 500 fewer than on Jan.1 2007, the biggest year-over-year decrease since 1992-1993, according to the group’s figures.

In Nebraska, however, NADA listed 213 new car dealerships at the beginning of this year, down only one since the start of 2007 and three since the start of 2006

The problem appears to be more severe among smaller independent dealers.

Numbers from the National Association of Independent Automobile dealers show there were 1,600 fewer independent dealers in 2007 than in 2006.

Jan Merritt, executive director of the Nebraska Independent Automobile Dealers Association, said her agency does not track numbers in Nebraska, and she said she had noticed only a slight decline in her membership.

Merritt did say, though, that she had heard of problems for small dealerships ranging from an inability to get enough quality cars to finding financing for customers.

Todd, of the Nebraska New Car & Truck Association, said he, too, has not seen much change in his membership. But he said it wouldn’t surprise him if smaller dealers are experiencing problems and going out of business.

“The reason a lot of dealers come and go is it’s a tough business,” Todd said.

Reach Matt Olberding at 473-2647 or molberding@journalstar.commailto:molberding@journalstar.com.