SIC 5012 Automobiles and Other Motor Vehicles
SIC 5012
This classification covers establishments primarily engaged in the wholesale distribution of new and used passenger automobiles, trucks, trailers, and other motor vehicles, including motorcycles, motor homes, and snowmobiles. Automotive distributors primarily engaged in selling at retail to individual consumers for personal use, and also selling a limited amount of new and used passenger automobiles and trucks at wholesale, are classified in SIC 5511: Motor Vehicle Dealers (New and Used).
421110
Automobile and Other Motor Vehicle Wholesalers
Total volume of used vehicles sold at wholesale auctions fell by 3 percent during 2004, to 9.67 million units. The slight slowdown was caused by fewer available off-lease units entering the wholesale market as, during the early 2000s, auto buyers took advantage of zero-percent financing and other promotional offers to purchase more new vehicles, thus reducing the number of auto coming off lease during the mid-2000s. Due to the tightening of supply, wholesale used vehicle prices climbed by about 1.8 percent during 2004, the first increase since 2000. Bright spots in the industry included a record number of rental units (almost 1.5 million) sold at auction and a 7 percent increase in certified used vehicle sales. Whereas used car operations at dealerships declined by 1 percent, independent used cars dealers moved a record 14.75 million vehicles during 2004. Repossession sales were down by 6 percent to about 1.5 million units, but more outstanding loans, longer terms, and higher loan-to-value ratios was expected to push up the volume of repossessed units.
The Census of Wholesale Trade breaks down typical wholesaling activity into three categories based on business ownership, ownership of goods sold, and the character of typical transactions. Merchant wholesalers are independent or chain operations that take title to the goods they sell from a manufacturer and in turn sell to a variety of clients. Approximately 60 percent of all wholesale sales are made by these firms. Manufacturers' sales branches and offices are owned by the product manufacturer or producer and sell to retail outlets and franchised dealers. The majority of motor vehicle wholesale sales fall into this category. Finally, agents, brokers, and commission merchants are independent merchants who buy or sell products for others. Sales for this category usually relate to commissions and fees.
Generally, automobile manufacturers maintain a network of franchised retail dealers who sell to the public and provide customer support and service. To maintain a unified corporate presence, the manufacturers also establish separate wholesale sales offices that set and monitor dealer sales practices, advertising and marketing campaigns, and retail pricing ranges. Because these transactions are internal to the corporate entities and regarded as proprietary in nature, little specific information is available.
Many sales are made to franchised dealers, but the manufacturers' sales offices also sell to fleet purchaser and rental agencies with guaranteed buy-backs after three to six months.
With dealers swamped with the growing volume of quality used cars, the manufacturers have increasingly shipped bought-back vehicles, known as program cars, to national auction chains, which have gained in size and popularity in recent years. Traditionally, the auto auction had been a small mom-and-pop operation designed mainly to redistribute used cars between differently branded dealerships or between regions of varying consumer market preference. Dealers of one type of car who took a competing make as a trade-in could wholesale the used car at an auction rather than display it on their own lots. In the late 1980s, however, some large players entered the auction arena and began consolidating many of the smaller operations into regional and national chains, transforming the industry into a high-tech "stock" market for motor vehicles.
Henry Ford's concept of mass manufacturing on the assembly line meant that his fledgling auto industry needed a means of mass marketing its product. Ford intended to build as many copies as possible of a universal automobile that everyone would buy. To do so, he and his competitors set up a network of small dealers who would buy the product and promote it locally, freeing up the manufacturer to concentrate on the technical development of the product and the evolution of the manufacturing process. This was particularly important in those early days of the industry, when communications were slow and unreliable. Making local managers and independent entrepreneurs responsible for everyday business decisions created a flexible and responsive marketing system.
As the American consumer's appetite for various models of automobiles increased, other manufacturers entered the arena. To maintain market share, Ford dropped the price of his Model T to almost one-half its initial offering, but still erosion continued. Innovation and product improvement picked up speed in the 1920s, prompting Ford to close his plant in 1926 for nine months to design and retool for his Model A. When he reopened, he found he had a new competitor, Chrysler, which produced few of its own components but responded quickly to market demand by sourcing parts and systems from supplier firms.
During this heady period of product innovation, the dealer network played a less important role in gaining and maintaining corporate profits than did the actual product. Those early years saw the complete domination of the world automotive market by American...
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