Toronto — While 52% of car dealers in Canada believe the value of their dealership is decreasing, over three quarters are committed to staying in the industry and are pleased with the products they sell, according to the 2008 PwC Dealer Trendsetter Survey, an annual survey of new car dealers in Canada conducted by PricewaterhouseCoopers (PwC) and DesRosiers Automotive Consultants Inc.

According to the survey of 250 dealers, 82% of dealers plan on staying in the business for at least five more years, including 95% of Japanese car dealers and 83% of the Detroit Three. In previous years, one in four dealers wanted to exit out of the business. And while 90% of respondents believe it is not a good time to sell their stores because of lack of available capital, reduced goodwill valuations and lack of qualified buyers, 36% would like to acquire additional dealerships should they be able to raise the necessary capital.

“Despite market issues facing the automotive sector, particularly the Detroit Three, dealers are still planning to stay in the game and probably longer than what they initially intended,” says Terri McKinnon, PwC Automotive Retail Leader. “2009 is forecasted to be a difficult year, but the results indicate dealers are looking ahead and thinking long term. The question is whether they have the right management team in place to weather the storm, as surprisingly 35% of dealers believe they do not.”

To help manage through the downturn, the vast majority of dealers are looking to increase revenues from fixed operations (66%) and finance and insurance products (59%), while 56% of dealers are planning on tightening controls over expenses, including reducing inventory. McKinnon adds, “This is a significant change from the mentality of dealers in the past. Given the current economic environment, they are realizing the business is not simply about moving metal, but also focusing on other areas of the business to generate profits and holistically serve their customers.”

Canadian dealers are also embracing the trend to multi-dealer formats of ownership, and 70% of dealers believe that during the next five years the business will be controlled by larger, multi-franchised dealers, which is especially the case for major markets.

But despite these strategies, only 56% of dealers have confidence in the long-term plans of their original equipment manufacturers (OEMs) to successfully see them through the next ten years. When it comes to management, over one third of dealers (38%) are not confident in their succession plans.

However, 75% of dealers are very pleased with the products they sell—a significant improvement from previous survey results when close to only half of respondents were satisfied with their products. “Although dealers are less optimistic about the future of their franchise, the results show they are still excited about the future product of the brand they represent,” says Dennis DesRosiers, President of DesRosiers Automotive Consultants Inc.

The Dealer Trendsetter Survey also followed up on some key trends seen in previous reports and introduced new topics of discussion. These include:

Investment in facilities

In the last 10 years there has been a significant amount of investment by dealers to upgrade their facilities to comply with the OEMs’ brand imaging programs. Sixty percent of dealers indicate that there continues to be a significant push by the OEMs to build new facilities or renovate their current facilities and to invest in image programs. However, only 61% of respondents cited an increase in return on sales on new facilities and only 50% for those dealers who renovated. On average, dealers have spent $5.7 million on new facilities within Ontario (versus $2.4 million in 2003), and BC dealers are spending twice as much as other regions of the country. DesRosiers adds, “Given the current economic environment it will be interesting to see if the OEMs continue to put pressure on the dealers.”

Japanese dealers have close to doubled their spending compared to domestic dealers, however 39% of Japanese dealers have not yet experienced an increase in profits, and only 42% have seen positive movement in their absorption ratio.

Partnership with the factory

While the majority of dealers are excited about the future product direction of the brands they represent, only 49% believe that their brand’s field representatives offer great value. Even fewer (43%) believe that the OEM is more of a valued and contributing partner in their business. The survey also found that smaller dealers (those with sales under 250 new units) and larger dealers (sales between 501-1,000 units) have better relationships with their factories than mid-sized stores.