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Lots of vehicles still on the lot

Hagerstown car dealerships struggle against high gas prices

Hagerstown car dealerships struggle against high gas prices

August 03, 2008|By AUTUMN PAPAJOHN

Hagerstown auto dealerships, like many across the nation, are struggling to push gas-guzzling vehicles off the lot and make room for compact cars.

Many dealerships are offering huge incentives to get rid of bigger vehicles, and many of them are running into the same problem - vehicle supply isn't meeting consumer demand.

As of June, Ford's U.S. sales dropped by 27.9 percent, and General Motors' second-quarter sales declined 27 percent.

Mike Reid, general sales manager of Hagerstown Ford, said his dealership is making next to no overall profit because truck and SUV sales have plummeted.

Reid said sales for his larger vehicles continue to drop by between 40 percent and 50 percent, while sales for more compact cars, such as the Ford Focus, have jumped by about 50 percent.

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Compact car sales aren't making up for truck losses because of the significant price difference between the smaller and larger vehicles, but they are forcing Ford to look more toward hybrid-based cars, Reid said.

The American Honda Motor Co. set a June sales record for the first time since 1990 with 97,639 cars sold, up 34.2 percent from last year, according to a Honda press release. Since this time last year, Honda sales are up 4.8 percent.

Jeff Knepper, sales manager at Hagerstown Honda and Kia, said Honda is one of the only manufacturers showing growth in the country because it did not lean into the SUV trend. The company instead focused on a fuel-efficient market, offering smaller cars.

"Americans are now starting to think more with their wallet and less with their ego because they have to budget and think of what's best for their families," Knepper said. "Bigger is no longer better."

Knepper's dealership is witnessing a monthly overall sale increase of 15 percent, selling an additional 20 to 30 cars per month more than the 200 cars they sell on average.

The Civic is Honda's No. 1 selling car right now, and for the last two months, it has put out between 40,000 and 45,000 per month in the U.S. Knepper said for the first time, Civic sales are surpassing that of the Ford F-150.

Unlike Honda, General Motors is facing heat as its brands drop in sales. According to AutoDigest, an online news source for the auto industry, GM controlled 26 percent of the U.S. auto market in 2005, but, as of May, that dropped to 18.4 percent.

Nathan Wagner, a sales representative for Hoffman Chevrolet Jeep, said sales of Chevrolets, a GM brand, have dropped by about 30 percent at the Hagerstown dealership in the last year.

"We used to sell as many trucks as we did cars, and now we don't sell hardly any," Wagner said.

General Motors didn't predict a huge jump in gas prices, and therefore set its production rates for compact cars much lower than expected, Wagner said. Now, dealerships cannot bring in additional compact cars because of the low output.

Customers want the small cars, but dealerships aren't able to provide them at a fast enough rate. Wagner said because SUV and truck popularity dropped, 90 percent of its shipments are compact cars. The dealership is offering $7,000 off sticker prices to get trucks off the lot since other dealerships won't take them.

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