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New World Order

Rob Pion says factory ordering has long been the norm with trucks and some SUVs

Rob Pion says factory ordering has long been the norm with trucks and some SUVs, but the wait time for some vehicles is now six months to a year.

 

When asked how many new cars he had on his lot, Rob Pion, general manager of Bob Pion Buick GMC in Chicopee, quickly said “eight.”

And he did so with a subdued voice that conveyed the frustration that he and every other auto dealer in the 413 is feeling right now regarding a situation that is clearly out of their control, but also a reality that must be confronted.

And the depth of that reality become clear when Pion paused after adding up his new-car inventory in his head and acknowledged that his number is certainly higher than some of his fellow dealers in the area.

“I guess that’s not really too bad compared to some others,” he told BusinessWest, adding that this situation is not going to get appreciably better anytime soon, especially when it comes to the trucks and large SUVs that comprise his bread and butter. Consumers don’t have a lot to choose from, so unless they want to settle, and many of them don’t, they must order what they want and wait for it to come in.

Before, you didn’t see that many factory orders — it would be the oddball unit. Now, we’re almost in a build-to-delivery stage, particularly with some of the domestics, like Ford; they’re really encouraging people to just put in their order — they know they’re making a car that the customer wants.”

Or, as the case may be with many truck models, and to borrow that famous line from the start of Casablanca, ‘wait, and wait, and wait.’

Indeed, these have become the days of factory-ordered vehicles — a trend that is a world removed from what dealers in this area are generally used to.

Yes, there have always been times when a customer would have to order and then wait for a model with a number of specific features, packages, or even a rare color. And when it comes to pickups, especially the larger models used for towing, factory ordering has long been a common practice.

But in these days when factories — dealing with shortages of not only microchips but a host of other parts — are well behind in production at a time when demand is high, factory ordering has become, well, the order of the day for many makes, especially pickups and SUVs, but also luxury models, which customers are generally more willing to wait for.

Peter Wirth says that, while Mercedes-Benz of Springfield has always handled a good number of factory-ordered vehicles

Peter Wirth says that, while Mercedes-Benz of Springfield has always handled a good number of factory-ordered vehicles, those numbers have never been higher than they are now.

“We’ve never had so many cars factory-ordered,” said Peter Wirth, co-owner of Mercedes-Benz of Springfield. “We have perhaps 50 cars at the moment that are already sold and just waiting to come in. Next month, for example, we have cars coming for inventory, and we have another 25 cars that are pre-sold.”

These factory-ordered cars are certainly helping dealers cope with inventory levels that are unprecedented, said Wirth, adding that, currently, perhaps 75% of total new-car sales are happening in this fashion.

“How many cars we have in our inventory is not a good measuring stick for us,” he went on. “It’s more a question of ‘what percentage of people who want to buy a car from us can we take care of?’ And the answer is still relatively high, as long as the customer is willing to work with us. And two things are helping us — the first is that the luxury-car buyer is generally more patient, and two, it’s been all over the media, so they’re generally used to it; they’ve heard from another brand they may have looked at, or maybe they heard it while they were trying to buy a kitchen appliance or building materials.”

Ben Sullivan, chief operating officer at Balise Motor Sales, agreed. He noted that factory ordering is becoming more prevalent, and the manufacturers are seeing some advantages to this profound change in the way things are being done — in this country, at least.

“Before, you didn’t see that many factory orders — it would be the oddball unit,” he told BusinessWest. “Now, we’re almost in a build-to-delivery stage, particularly with some of the domestics, like Ford; they’re really encouraging people to just put in their order — they know they’re making a car that the customer wants.”

Could this new way become a more permanent model for the future given what appear to be real advantages for the manufacturer and even the dealer? Sullivan acknowledged that this is a legitimate question, and that factory ordering is far more prevalent in other parts of the world, where huge showrooms and hundreds of cars on a lot are simply not practical. But he and others wondered out loud if Americans would tolerate such a process in anything but an emergency situation.

“The United States market has never operated that way,” he noted. “Ford has gone public and said they would like to move that way, so we’ll see. It will be a component of where things go, but I don’t know if it will ever completely replace what we’re used to here. Americans, once they’ve made a decision that they want to buy something, whether it’s a car or a TV … it’s a matter of immediacy.

“When you tell people you necessarily can’t get X, Y, or Z — or, if you can, you don’t know when — some people will wait, but others will say ‘I don’t need a truck right now,’” he explained. “Before, people would order vehicles, then they became trained to buy one off the lot — that Amazon-like mentality where, if I can’t have it in one day, I don’t want it, or I’ll move along.”

“I’ve had customers that have had vehicles on order for nine or 10 months for one reason or another. They haven’t been built, and they may never be built because of shortages of certain things.”

Moving forward, Sullivan said, dealers will ultimately have to be ready, willing, and able to serve customers in both ways — those who want to factory order a car and those who want to come to a lot, pick out a car, and drive it home a few days or even a few hours later.

“The way that we look at it as retailers is that we have to be adaptable enough to handle the people that want a car absolutely today, and those who want to put in an order and get it exactly how they want it and wait 12 weeks. For us, we have to be able to do both.”

Wirth concurred, noting that the current trends represent a minor shift from the way things were for his brand. Indeed, he said maybe two-thirds of those looking to buy a car wouldn’t drive home with something already on the lot. Instead, they would want something close, and the dealership would try to find it through its “pipleline” — a sister store in New Jersey or other dealerships in the Northeast.

Now, with inventories low everywhere, finding the car in the desired color and with all the preferred options and packages is becoming far more difficult. So the preferred route is now factory-ordering one and waiting for it.

Generally, the wait is a few months, but for some trucks, it can be half a year or more, said Pion, demonstrating that, even with factory ordering, there are limitations and challenges — for the dealer and the consumer.

“I’ve had customers that have had vehicles on order for nine or 10 months for one reason or another,” he told BusinessWest. “They haven’t been built, and they may never be built because of shortages of certain things.

“The problem you run into when you get to trucks is they get so granular,” he went on. “It could be as simple as ‘I want this wheel,’ and they just don’t have that wheel available. A simple option here or there makes a vehicle unbuildable.”

In this climate, some consumers are settling for somewhat less than everything they want, while others are not. “Some say, ‘it doesn’t matter if it takes a year or a year and a half for the truck to come in; I want what I want,’” Pion explained, adding that, in such cases, a new model year may arrive before the order is filled, and a 2021 model becomes a 2022.

 

—George O’Brien

Coronavirus

Driving Forces

Ben Sullivan

Ben Sullivan says inventory has been an issue for many car dealers, but overall, the picture is much brighter than analysts were predicting in the spring.

Back in the earliest and darkest days of the pandemic (at least in this part of the country), analysts within the auto industry were predicting that overall sales for 2020 might be off perhaps as much as 80% from the year prior.

Those projections turned out to be well off the mark, as were some of the later estimates as well, said Ben Sullivan, chief operating officer for Balise Motor Sales, adding that a number of factors have made this year — and it’s a little more than half over, so a lot can still happen — much better than perhaps anyone could have imagined back in late March and early April.

These factors include stimulus checks that provided some disposable income for many people, as well as some extremely attractive incentives from the manufacturers, including 0% interest for as many as 84 months, job-loss protection, and no payments for six months.

“From an auto-dealer standpoint, I don’t think we were intended to be direct beneficiaries of any stimulus money,” Sullivan said. “But what the consumers are doing with the money has certainly offset what we expected to be a much steeper decline in the auto business than what we have actually experienced.”

But some of these same factors, coupled with pandemic-forced factory shutdowns, have created a slew of challenges for auto dealers as well. These include shortages of inventory for new cars, although there seems to be some improvement on that front, according to those we spoke with, and an even more pronounced shortage of used cars, which is spurring something almost historic when it comes to the prices offered to those willing to trade in vehicles or just sell them outright — something that’s happening with increasing frequency.

“There’s an unbelievable shortage of used cars,” said Sullivan. “There just weren’t as many cars coming into the system, for a variety of reasons, and that made used-car trade-in values go up. And people are recognizing that and saying, ‘if there if was a time to trade in a car, now’s the time’ — and that’s helping the new-car market.”

As for overall inventory, a drive by any dealership in the area would reveal fewer cars in the lot, a clear reflection of what’s happening with both new and used vehicles, said Peter Wirth, co-owner of Mercedes Benz of Springfield, noting that his store is typical in most respects. There’s a smaller supply of used cars (only about 12 days, as opposed to the 30-to 45 days that would be typical) and fewer new cars as well as the factories try to catch up for the time lost when they were closed or making other products, such as respirators, in the case of General Motors.

“There just weren’t as many cars coming into the system, for a variety of reasons, and that made used-car trade-in values go up.”

The situation is improving, though, and by late August, most expect a return to something approaching normalcy.

“We’re starting to see inventories coming back, which is exciting for all of us,” said Carla Cosenzi, president of TommyCar Auto Group, adding that, while the landscape may change and there remains a good deal of uncertainty, there is currently demand for those cars that will soon be filling the lots.

Which is good because, while sales of used cars (if dealers can get them) have been more than solid, new-car sales have been off — but, again, not as much as the experts thought they would be back when states were shut down and governors were rolling out phased reopenings.

“I’d say, on average, the sales pace for the new-vehicle industry in the Northeast is probably down 10% to maybe 15%,” said Sullivan, adding that these numbers could not have been imagined back in the spring, when it looked like the bottom might fall out of the market.

Looking ahead … well, looking ahead is something that’s difficult in any sector. But those we spoke with said that, overall, dealers are in decent position for quarters three and four. Inventories are improving, there is still some pent-up demand, there are still plenty of incentives, and new models are arriving on many lots.

But as they’ve seen already this year, things can change in a hurry, and projections — as those made way back in March can attest — are difficult to make.

Hitting the Accelerator

As he talked with BusinessWest at the Mercedes dealership on Burnett Road, just off turnpike exit 6, Wirth noted that, in many respects, a touch of normalcy has returned to this store, and the business of car selling in general.

Indeed, he noted there were several people sitting in the service waiting area, more than there would have been back in the spring, when ‘pickup and dropoff’ was the order of the day — and it’s still a popular option. Meanwhile, all employees are back at the dealership — many of those who could were working remotely in the earlier days of the pandemic — although there are now vacant workstations between those with people, and some sport plexiglass dividers between them. Perhaps most importantly, business is … well, perhaps not normal, but it’s certainly in the ballpark.

Peter Wirth

Peter Wirth says business is returning to something approaching normal at Mercedes-Benz of Springfield, and the summer and fall look promising as new models roll in.

In many respects, the dealership is well-positioned for a solid year, despite the pandemic and various negative forces it has created, Wirth said, listing everything from those aforementioned factory incentives — Mercedes has them as well — to lingering, pent-up demand; from new models arriving regularly to the mix of vehicles consumers are demanding.

“This might be the second year that we’re producing more SUVs than cars on the new-car side, and we’re almost at 60-40 now,” he explained. “It took us a couple of years to get there, but that’s what the market wants. So, maybe for the first time in five years, we’re actually in sync with what the market wants, and I think that’s going to help us.”

But while there are some signs of normalcy and even progress when it comes to sales volume, there are reminders everywhere that these are very different times — from the masks on the customers and employees to the deep cleaning that accompanies every car that leaves the service bay, to the cars in the lot, or the lack thereof, to be more precise.

Sullivan told BusinessWest that inventory has been an issue across the broad portfolio of makers within the Balise stable. Closed factories were a big contributor to the problem, he said, but supply-chain issues were, and still are, a factor as well.

“Next to the tsunami that hit Japan, the pandemic and everything it has brought has had perhaps the most impact the auto industry has seen since World War II,” he explained. “The supply chains got interrupted, and this is a global industry; there’s parts from Scandinavia, China, Japan, Mexico, Canada, the list goes on. And it really only takes one part to not be able to have a production line running.

“If you have a plant that goes down, and you’re missing that key component, you can’t build an F-150, or a Silverado, or a Camry,” he went on. “The industry has been absolutely disrupted from an availability standpoint. But the good news is that it’s a pretty resilient industry; they find other suppliers and ways to navigate through. But we are a low point of availability.”

Some makers were hit harder than others, he continued, noting that General Motors never fully recovered from the strike of last year before the pandemic hit, and the arrival of COVID-19 further complicated matters, especially when it comes to the production of trucks, one of the more popular items in recent years.

Unlocking Options

Overall, though, and especially as the summer has progressed, buyers have had a better time of trying to find the make, model, and color they want. Mercedes has a sister store in New York that effectively doubles the dealership’s chances of quickly supplying want the buyer wants, and Balise and TommyCar have similar relationships within the industry.

Some are settling for maybe their second-favorite color or a model with most but not all the options they were looking for, said those we spoke with, while others chooose to wait for exactly what they want. And the wait is getting slightly shorter.

“We’re lucky that we carried a good days’ supply of inventory before this happened, so we were in a good position as far as the number of units we were able to maintain through this, and now, we’re starting to see the manufacturers supplement the inventory back,” Cosenzi said. “But the biggest hurdle was being able to get the exact specifications a customer was looking for when it came to new cars.”

If the new-car market is getting somewhat back to normal, the same can’t really be said for used-car buying, which, as noted earlier, is in what would have to be called uncharted territory — or at least a place visited very infrequently.

Using words and numbers, those we spoke with said demand for used cars is through the roof — even for convertibles — and this is definitely a sellers’ market.

Carla Cosenzi

Carla Cosenzi says getting used cars has been a real issue for most car dealers, and that will continue to be a challenge for the foreseeable future.

Sullivan knows, because he recently was a seller — if you count trading in as selling.

“I traded my wife’s car in two weeks ago, but it really is the best time you could ever ask for,” he said, adding that prices are up, on average, almost $1,800 per car over the past few months. “With my car, I got $2,000 more than I would have two months previous — or two months from now. It just happens to be that timing in the market — the used-car market has defied every industry analyst’s predictions during COVID.”

Overall, a number of factors are contributing to the bustling used-car market in the 413, Wirth said. For starters, this is more of a used-car market than a new-car market, and from all he can gather — he’s been in it for four years — it always has been. What’s more, with the pandemic creating questions about the future and some economic uncertainty for many, used cars are being seen as an attractive, less risky option than buying new — even with all those incentives from the carmakers.

But supply, as it is with new cars, is perhaps the biggest driving force.

“I think that the used-car market will fall at some point, but you never know; it’s so hard to predict what’s going to happen given the circumstances.”

Sullivan told BusinessWest that most all of the auction houses where so many used cars are acquired by the dealers were closed for a long stretch early this year, removing those supplies. Meanwhile, many leases were extended due to the pandemic, taking those cars out of circulation. And some consumers simply decided that, given the conditions, they would hang onto their car for at least another year.

All this forced dealers to look elsewhere and explore options ranging from buying some of the suddenly unneeded rental cars cluttering lots across the country to buying cars off the street, a tactic Balise deployed.

And that imagination has been needed, because demand — fueled by cautiousness in the era of COVID-19 and other factors — has certainly spiked.

Bottom Line

As for what happens next … it’s hard to say with any certainty, because there are so many unknowns when it comes to the virus, the economy, additional stimulus, and other factors.

“There’s so much uncertainty, but especially when it comes to where the customer demand will settle in,” said Cosenzi. “And we’re prepared to adjust our operations accordingly. We’re starting to see a lot of the manufacturing plants open up and trucks pulling into the dealerships with the cars we’ve been waiting for. I think that the used-car market will fall at some point, but you never know; it’s so hard to predict what’s going to happen given the circumstances.”

Sullivan agreed.

“We’re not out of the woods yet,” he said. “And we’re incredibly grateful for being in as good shape as we are. When we looked at what the analysts were saying, that can really put a lump in your stomach. I’d like to say that we’re wildly optimistic, but we can’t be because we know there’s some choppy waters ahead.”

With that, he spoke for everyone in a business that has fared much better than most could have dreamed, but is still staring at some rather large question marks.

George O’Brien can be reached at [email protected]

Autos

’Tis the Season

Peter and Michelle Wirth, co-owners of Mercedes-Benz of Springfield, stand in a showroom that is expected to see a heavy volume of shoppers looking to take advantage of end-of-year sales.

The names of the programs have become ingrained in consumers’ consciousness — December to Remember, Winter Sales Event, Wish List Sales Event, and many others — and the TV commercials are seemingly endless. But the year-end auto-sales initiatives have several goals, and have become a present for dealers and consumers alike.

The commercials started appearing during the football games and the Jeopardy! Tournament of Champions, among other places, a few weeks ago.

You’ve seen them … the ones where mom or dad, or perhaps their college-age daughter, looks out the window on a snowy Christmas morning to find a new car in the driveway with a big red bow on the roof or the hood.

The commercials, and there are a lot of them now with a host of themes, are part of what has become a very important — and generally very joyous — time for car makers, car dealers, and, yes, consumers: the holiday, end-of-year sales.

These campaigns all have names now — there’s the Toyota-thon, the Lexus December to Remember, the Mercedes-Benz Winter Event, the Lincoln Wish List Sales Event, and many others. And while it was once mostly a luxury-brand initiative, it’s now generally across the board.

“You have all this inventory being built based on how many vehicles the industry analysts believe are going to be purchased that year. Well, if they forecasted ’19 to be up, and it’s flat, right away you have probably more inventory than you need; this is going to be a great holiday for consumers.”

As for those commercials, while farfetched to some, they are, well, spot on in some respects.

Indeed, a growing number of consumers will ask for that red bow, and, yes, they do like to have it on the car as it sits parked in the driveway or garage on the holiday morning, said Ben Sullivan, chief operating officer for Balise Motor Sales.

“It happens more than most people might think,” he told BusinessWest, adding that, while some dealers will make timely and perhaps dramatic deliveries — even on Christmas Eve — most buyers will get the car (and the bow) a few days before and stash them somewhere.

And there should be more cars with ribbons on them in driveways this year, figuratively if not literally, said Robinson and others we spoke with, because this year’s holiday season is shaping up to be a big one for consumers.

That’s because, overall, auto sales in 2019 have been flat, which is still good considering how strong they’ve been for the past few years. But they were projected to be a few percentage points higher than last year.

Roughly 3% to be more precise, Sullivan went on, adding that 3% of 17 million (the approximate number of cars sold in each of the past few years) is a big number.

“You have all this inventory being built based on how many vehicles the industry analysts believe are going to be purchased that year,” he explained. “Well, if they forecasted ’19 to be up, and it’s flat, right away you have probably more inventory than you need; this is going to be a great holiday for consumers.”

But that’s only one of the reasons why this could end up being an extraordinary holiday sales period, said those we talked with, adding that, in addition to the traditional tax breaks for commercial vehicles — especially the first-year bonus depreciation deduction — a number of other factors are quite favorable.

Ben Sullivan says the holidays sales event help clear lots of cars in advance of the new model-year arrivals, while also helping manufacturers meet their goals for a given year.

These include gas prices — a little higher than earlier in the year, but still relatively low — as well as interest rates (low but projected to climb in 2020) and consumer confidence, which is still rather high as recession fears have eased in recent weeks.

But even in what would be considered more typical years, the holiday-season sale has become an effective vehicle for clearing lots of cars before the new models roll in, and also for introducing a brand to people who might otherwise overlook it.

That’s the case with Mercedes, which has been working hard in recent years to convince car buyers that its models (or some of them, anyway) are within their reach.

Peter Wirth, co-owner of Mercedes-Benz of Springfield, said the dealership, which draws from a large geographic area that includes Southern Vermont, Southern New Hampshire, Eastern New York, and Northern Connecticut, has been active in trying to introduce itself to consumers seeking a lower price range. And the year-end event has been one of many drawing cards.

Joe Clark, general manager of Steve Lewis Subaru in Hadley, said that car maker’s holiday sales event has a different name and different twist. The former is Share the Love, which partially explains the latter, which involves contributions to charities, which adds another ‘win’ to what was already a win-win-win scenario.

Subaru donates $250 for each car sold to a charity of the buyer’s choice, said Clark, adding that there are national and local options, and Steve Lewis matches with $50.

“In 2019, it took until July before all the ’18s had been sold off. In the meantime, all the manufacturers are making ’19s, and here we are coming into the end of the year; you want to start as clean as you can with the next model year.”

“Over the past few years, we’ve been able to raise more than $50,000,” he said, adding that, while Subaru doesn’t offer the same kinds of incentives as other makers — he says it doesn’t need to because the cars are priced appropriately — the charitable donations act as an incentive to bring consumers to the showrooms at the end of the year.

For this issue and its focus on transportation, BusinessWest talked with area dealers about these year-end sales and how they’ve become a different type of holiday tradition.

Opportunities Present Themselves

Tracing the history of the holiday sales push, Sullivan, who works for a company with more than a dozen brands in its portfolio, said that, traditionally, November and December were not big months for dealers, emphasizing the past tense.

Weather played a part in this, he said, as well as the fact that people are, by and large, focusing their time, attention, and spending dollars on the holidays and not a new car.

To spark some life into end-of-year sales activity, manufacturers, as a group, began to offer some of their best incentives at that time of the year, with the goal of hitting sales targets set roughly 12 months earlier.

Now, the deals, the incentives, and, yes, those red ribbons have become a tradition, and savvy buyers set their watches by it.

So much so that October has become a somewhat lackluster month for many dealers.

It wasn’t for Mercedes, which stages an annual certified pre-owned sale that month, said Wirth, adding that the Springfield dealership had a great October and was challenged to keep a good inventory of used cars on the lot.

But that’s another story.

This one is about the holiday sales events, which have, overall, done what they were designed to do — clear inventory and help manufacturers and dealers hit their numbers.

Joe Clark says Subaru’s ‘Share the Love’ year-end event provides consumers with still another reason to shop that brand at the end of the year.

And this year, the sales will be needed to do both, said Sullivan, noting, again, that sales have been flat and there are a lot of 2019s still on the lots that manufacturers would prefer to see gone by year’s end or at least early next year.

“In 2019, it took until July before all the ’18s had been sold off,” he went on, adding that some 2019 models, like the Toyota Tacoma, are still being built. “In the meantime, all the manufacturers are making ’19s, and here we are coming into the end of the year; you want to start as clean as you can with the next model year.

“So this year, in particular, will be interesting because it took so long to get the ’18s sold off, and now we have ’19s that we have to sell off,” he continued. “I expect that the manufacturers are going to do even more in this holiday season than they would typically in order to alleviate that stock level.”

Wirth said Mercedes has two major seasonal pushes — its summer sales program, designed to help dealers clear out inventory before the new model year arrives, and the year-end initiative, which helps meet annual sales goals.

The latter, the Winter Sales Event, is among the oldest in the business, Wirth noted, adding that Mercedes throws not only large amounts of marketing dollars at the program, but some attractive incentives as well.

“And we latch onto these programs on a dealership level because it’s not just marketing,” he told BusinessWest. “The deals are actually really good; if you’re in the market for a new car, November and December is a really good time to buy.”

Elaborating, he said that, while the incentives might not change on some of the models — and Mercedes has quite a few of them — for those months, the deals will become better for models where there is significant inventory and an opportunity to make a dent in it.

And unlike the deals presented by many manufacturers, those at Mercedes involve the latest models, in this case 2020s, as opposed to the 2019s on most lots.

Wirth told BusinessWest there isn’t a deep body of work when it comes to this dealership and the year-end sales events; after all, it opened just a few weeks before the holidays in 2017. But already some trends have emerged.

One involves commercial vehicles, and, yes, Mercedes sells a good number of them. Its vans, the mid-sized Metris and full-size Sprinter, can compete with other makes on price, and they have the Mercedes star on the grill, said Wirth, adding that some of the SUVs also qualify for what’s known as the Chapter 179 tax deduction.

“The accountants talk to their clients and say, ‘hey, you need to do something,’” he noted, adding that, while he can’t remember whether November or December was the top month for van sales last year, the other came in just behind.

Another trend involves the last few months of the year becoming some of the busiest of the year, something that has pretty much always been the case for luxury imports. In fact, the week between Christmas and New Year’s might be the busiest of the entire year, although the week before the holiday is also quite busy, said Wirth, adding that the perception that the very best time of year to buy a car is toward the end of December may well have something to do with this.

But he said the dealership strives to make it a good experience regardless of the month or the date.

Overall, the year-end tax breaks on commercial vehicles have long made November and December strong months for those types of transactions, said Sullivan, adding that, over the past several years, the holiday sales events have broadened the scope of activity to pretty much all brands and all types of vehicles. They’ve made October a somewhat lonely month for dealers, but November and December a time of excitement and, well, anticipation as they wait to see what the incentives will be.

“It’s much like a Christmas present for dealers — we have to wait to open it up when they say ‘the event is now on, and here are the consumer incentives you’ll be able to offer,’” he explained, adding that the numbers are generally known by the middle of November.

And while dealers and consumers are on the receiving end of presents, Subaru’s annual holiday event puts another group in that category — regional and national nonprofits.

“It’s not about car sales or how much you can save on a car,” said Clark. “It’s about Subaru doing what’s right and raising a bunch of money for some great charities.”

Like all the other programs, though, it provides consumers with a reason — or some additional reasons — to shop at the end of the year, he went on, adding that, over the years, the Steve Lewis dealership has supported groups and agencies ranging from area schools to the Dakin animal shelter. This year, the beneficiary will be Cooley Dickinson Hospital’s Cooley Cares for Kids program.

While there are some inventory-clearing motivations for the holiday-sales event, generally Subaru doesn’t have excess-inventory issues, he noted, and, in fact, keeping a supply on the lot is the main challenge.

That’s a Wrap

As he talked while walking through the Lexus dealership on Riverdale Street, Sullivan gestured to the ornate red ribbons atop each of the models on the floor.

He said they’re supplied by a local maker, and generally start appearing on car roofs a few weeks before Thanksgiving. He didn’t say whether this year’s order was larger than normal, but he certainly implied that more ribbons — again, figuratively if not literally — will be needed this year.

That’s because, as he said, this is shaping up to be a joyous a holiday for consumers — one right out of one of those commercials.

George O’Brien can be reached at [email protected]

Autos

Ben Sullivan, COO of Balise Motor Sales, says pick-up truck sales, especially those involving small trucks, have been moving steadily higher in recent years.

As Pick-ups Evolve and Offer Consumers More, Sales Spiral

While most of the focus in the auto-sales market has been on the meteoric rise of the SUV, pick-up truck sales have also been climbing, and for the same reasons. Like SUVs, the trucks now offer many of the features and amenities of a car — from leather seats to solid gas mileage.

Ben Sullivan notes that while SUVs and cars seem to be making all the news these days — the former because of how well they’re selling, and the latter because how they’re not selling — there is that third segment of the market that is making a lot of noise in its own right; trucks.
This is not a recent phenomenon, noted Sullivan, chief operating officer for Balise Motor Sales, adding that truck sales have been solid for some time and especially since the end of the recession and during the recent, and prolonged period of relatively low gas prices. But the number of truck sales continues to be move higher, and for several reasons, one in particular.

“What we’ve seen over the past decade is a significant investment by the manufacturers in not only styling, but ride comfort, quietness, electronics, safety equipment, and especially fuel economy,” said Sullivan. “To the point where they’ve made the pick-up truck probably the primary choice for people; they can drive it to the country club on the weekend and to a work site during the week. It gives people a lot of flexibility.”

He noted that while the sales of mid-sized, half-ton trucks (think Ford 150, Chevy Silverado, and Dodge Ram, the three most popular sellers, and in that order) have been relatively flat, there is considerable movement in the smaller-truck market, featuring brands like the Toyota Tacoma, Ford Ranger, and Chevy Colorado.

He called this development a “resurgence,” because small trucks were popular in the ’80s, then things cooled off considerably, and now, they’re picking up again (pun intended), and in rather dramatic fashion.

“For years, the small-pick-up-truck market fell dormant behind the explosive growth of the half-ton-pick-up-truck market,” he explained. “Been there’s been a real resurgence in the small pick-up.”

But while the smaller trucks are selling, there is solid movement across the board, especially when there are incentives available.
Indeed, Jeff Sarat, owner of Sarat Ford Lincoln in Agawam, said he normally sells about 20 to 25 super-duty trucks — that would be the F-250 through F-550 and up — each July. Last month, he sold 54, more than a 100% increase.

Jeff Sarat says pick-ups now offer almost everything cars and SUVs do, including solid gas mileage.

“Ford came out with some really aggressive programs — 0% for 72 months – so they created a market, which was phenomenal for business,” he said. “I had multiple customers buy more than one, because businesses — and that’s really who’s buying those type of trucks — they haven’t had that deal for three years.”

The response was quick, too, he added, as Ford didn’t even start the promotion until mid-July. “My guys just got on the phone and started calling people: “hey, we can lower your payment 100 bucks and put you in a brand-new truck.’ And people were flocking in. It was awesome.”
Ford agrees, extending what was supposed to be a two-week promotion through Labor Day, creating worries that Sarat might actually run out of trucks before the October-through-December season, which is traditionally a good time for truck sales — he usually sells about 100 super-duties over those three months — as businesses make year-end purchases for tax purposes.

Looking ahead, those we spoke with said truck sales, like SUVs, will continue to move higher at the expense of the car, because, again like SUVs, the product continues to evolve, improve, and provide more of what consumers are demanding.

Work in Progress

Sullivan recently relocated to Western Mass. from Texas, specifically the Dallas area. The Lone Star State is known for many things — from oil to cattle to Friday night football — but it might just be the pick-up truck capital of the world.

“They really like their pick-ups in Texas,” he said with a smile, noting that while nationally, one auto purchase in five is a pick-up, in Texas, it’s at least one in four. And in keeping with the state’s character, bigger — and better-appointed — is better.

“You’re not a gentleman cowboy unless you’re driving an F-250, which is a diesel engine, with King Ranch leather interior,” he said referring to the expensive brand of leather from that ranch in Texas. “And that thing is probably an $80,000 truck by the time everything is said and done.”
Western Massachusetts, and the Northeast as a whole, is a long way from Texas, geographically and also with regard to the popularity of pick-ups, but this region is gaining some ground in that regard, if you will, and numbers supplied by Sullivan bear this out.

He said that since the start of the year in Massachusetts, Connecticut, and Rhode Island, roughly 300,000 vehicles have been sold. Of those, 31,000 would be considered mid-sized, half-ton trucks; 20,000 are larger work trucks, and 13,000 are smaller, quarter-ton trucks, leaving a total of 54,000 pickups sold to date, not quite 20% of the total volume of vehicles.

And, as noted, while the biggest surge has been with the smaller trucks, sales are steady across the board, thanks to a still-solid economy that is fueling sales to consumers and businesses alike, and especially the former.

“Those guys are having good years, and they’re adding people,” said Sarat, referring to the builders, contractors, landscapers, and others that rely on larger trucks and work them hard. “When the economy is up, it’s good for everybody, and that especially helps us because we specialize in trucks.”

And the numbers are only expected to climb higher for those reasons cited earlier by those we spoke with. Where once people had to sacrifice things like comfort, luxury, room, technological bells and whistles, and especially gas mileage when they bought a pickup, now, they don’t have to.

Indeed, Sarat used the Ford F-150 to get his points home. This model remains popular among non-commercial drivers, although some businesses use them in their fleets as well. ‘I drive one,” Sarat said. “If you have a family of five, you can all hop in it and go somewhere — and put something in the bed if you need to.”

And, as noted, the trucks are becoming more car-like in terms of comfort and features which each passing model year.

“Every year, the technology gets better, and the safety features get better,” Sarat said. “I have an app on my phone that I can use to start my truck anywhere in the world. If a check-engine light goes on, from that app on my phone, I can see, ‘OK it’s an oxygen sensor, I’ve got to get it in for service,’ or maybe it’s nothing major, and it’s on because this is something I can fix.”

Safety features like self-parking and anti-collision assist are common in today’s trucks as well, and self-driving vehicles aren’t far away, he added. Plug-in hybrid options are creeping into the truck market as well, for people who crave fuel efficiency – or just want to use less fossil fuels. Even traditional, gas-powered trucks are being built with fuel economy in mind.

“I just drove to Ohio last week with my son, 580 miles. And I got out there on one tank of gas,” he said. “My fuel economy was better than I’ve ever had in any truck. Once I got out there, I still had about 100 miles left. That, to me, was impressive.”

Whether it’s efficiency, safety, or other technology, “it’s slowly getting better,” Sarat said. “It’s ever-changing. They’re definitely not stagnant, that’s for sure.”

Sullivan agreed, adding that all these amenities obviously come with a cost, but it is one that consumers seem ready and willing to pay.

“Manufacturers still have to make the affordable work trucks,” he explained, adding that there’s a work-truck grade, a grade above that, and maybe a few above that. “But by the time you’re done with the leather interiors, the technology and the touch-screen displays, the heated and cooled leather seats, you can drive the price of those trucks up quite a bit.”

By that he meant north of $60,000 or $70,000 — and even higher if one wants a fully loaded F-150 King Ranch. And what’s interesting, he noted, is that the manufacturers haven’t yet determined just what the ceiling is for these vehicles in terms of luxury and appointments — and what people might be willing to pay for all that.

“What the manufacturers have been playing with at the top is … ‘how much truck is too much so that no one will buy it?’” he told BusinessWest. “I don’t think they’ve found that yet.”

The Ride Stuff

While Texas and the rest of the pick-up-truck buying world awaits an answer to that question, dealers here and seemingly everywhere continue to record healthy sales of the vehicles.

It’s a movement that seems destined to continue and probably accelerate, because today’s trucks are not yesterday’s trucks.
As Sarat noted, they are anything but stagnant. They are moving — in every sense of that word.

George O’Brien can be reached at
[email protected]

Cover Story

Century Unlimited

Jeb Balise

Jeb Balise stands in one of the company’s car washes, this one on Riverdale Street.

Some time in 1919 — when, exactly, no one really knows — Paul Balise went into business for himself repairing automobiles and selling them on the side. Today, that company he founded is one of the largest auto-dealer groups in New England and one of the 50 largest in the country. But in most all ways, it’s still doing business the same as it was when Woodrow Wilson was in the White House.

As he flipped through the large photo albums he helped assemble, Bobby Balise moved slowly and methodically, stopping at each page, and sometimes each image, to offer a little commentary.

That’s because every item in the collection helps tell a story that’s now 100 years in the making.

There’s the picture of the small repair garage in Hatfield where it all began. There are photos of the family’s farm and some of the animals raised there. Moving ahead a few pages, there’s a sales receipt from 1936 for a three-year-old Chevrolet Town Sedan sold to a William Bolack, sticker price $410 ($50 was given for a 1929 Ford that was traded in). Little did he know the transaction would become a piece of family history.

Honda models mingle with Chevys in the early 1970s.

Paul Balise’s used car business on Front Street in Chicopee

Paul Balise’s used car business on Front Street in Chicopee

Flipping a few more times, Balise came to a grainy copy of a newspaper photograph, an aerial shot showing the Chevrolet dealership on Columbus Avenue, the York Street Jail across the road, and other buildings in Springfield’s South End — including dozens of homes that would be torn down years later to make way for I-91 — standing in more than three feet of water after the hurricane of 1938.

And then, a few more pages in, there’s a photo montage of that day in 1954 when the Budweiser donkeys came to Springfield. That’s right, donkeys. Apparently they were used in addition to the famous Clydesdales to pull the wagon used in promotions for the beer maker. There’s a photo of the team passing that same dealership on Columbus Avenue and then another of them in the showroom. Balise explains:

“They were going to tour the South End of Springfield and the restaurants down there and entice people to buy more Budweiser. The story goes that they were supposed to stay at the stables across the street where the town had the horses for the garbage collectors. But something fell apart, there wasn’t enough room, the horses didn’t get along with donkeys, I don’t know what, but my Uncle Paul said they could house them in his showroom.”

The Budweiser mules came to Springfield in 1954 and bedded down for a night at Balise Chevrolet, one of the more intriguing pages from the company’s long history.

The Budweiser mules came to Springfield in 1954 and bedded down for a night at Balise Chevrolet, one of the more intriguing pages from the company’s long history.

‘Uncle Paul’ is Paul Balise, founder of the company now known as Balise Motor Sales. He grew up on a farm, as noted earlier, but gravitated toward repairing and selling farm equipment, and then, as they became more popular, automobiles, said Bobby, whose business card reads ‘parts inventory manager’ for Balise Honda, but whose unofficial title is company historian, a role he relishes, to put things mildly.

Paul Balise started with an auto-repair business called the Square Deal Garage and sold cars on the side, his nephew went on. Later, he established a used-car business on Front Street in Chicopee and would eventually become a Chevrolet franchise dealer. He moved to Main Street in Springfield before talking a big leap and leasing — and then buying — the lot on Columbus Avenue that Balise Hyundai still stands on today (much more on all this later).

He was succeeded by his son, Jim, and then his grandson, Jeb, as president and dealer, and over the past few decades, Balise has grown to be the largest dealer group in this region, one of the largest in New England, and among the 50 largest in the country.

Summing up the first 100 years quickly and succinctly, Jeb Balise said that, starting with the garage in Hatfield and continuing with his grandfather’s risky decision to buy the Williams Dodge property on Columbus Avenue, his father’s gambit to sell a little-known Japanese car called Honda at the Chevy dealership, and carrying on today with Balise car washes and a host of auto-related businesses, the company has seized opportunities when and where it could with an eye toward staying on the cutting edge of an always-changing business.

“Starting with my grandfather, we’ve been entrepreneurial and always looking for better ways to serve the customer,” he said, adding that it has been this way since 1919.

When, exactly, in 1919 no one really knows, said Bobby Balise, adding that the company that has become one of the most recognizable brands in this region had a rather informal beginning.

And there are some other dates and miscellaneous bits of information that remain question marks, such as the precise location of that dealership in Chicopee.

But a great deal is known, he went on, adding that much of the company’s history has been chronicled in some form, and over the course of a year-long centennial celebration, the company will try to tell some of that history.

While doing so, it will write some new chapters and add more images to the albums — figuratively if not literally, said Jeb, adding that, in this age of consolidation within the industry, the Balise company is only looking toward what it will take to be around another 100 years.

History Lessons

Alex Balise McEwen, Jeb’s daughter and fourth-generation member of the Balise leadership team — she’s the marketing manager — told BusinessWest that the company is still piecing together plans for how and when it will mark the centennial.

“This will be a year-long celebration,” she noted, adding that, in addition to bringing back the familiar ‘You’ll Do Better at Balise” slogan, radio commercials and other forms of marketing are noting that the company is commemorating 100 years of doing business in this region.

Alex Balise McEwan, fourth-generation member of the Balise leadership team

Alex Balise McEwen, fourth-generation member of the Balise leadership team, says the company will celebrate its centennial throughout the year and in many different ways.

This business has certainly come a long way since the Square Deal Garage, and there have been many individuals and milestones of note, she went on, and the company will use various methods to tell those stories — such as the back wall of the area of the service department at Balise Honda where customers would pick up their vehicles after the work was done. There, several photos and types of imagery have been placed that help tell the story of this particular dealership.

There’s a large photo of Milton Berman, founder of Yale Genton, the large clothing store that once stood on the property at the south end of Riverdale Street, as well as a photo of that store. But most of the others are related to the Honda brand and Jim Balise’s somewhat risky but ultimately rewarding decision to sell the small Japanese cars.

Indeed, there’s a window sticker for a 1971 Honda model; the price was $1,775. There’s also a photo taken in 1972 in Forest Park showing Jim Balise and several of his colleagues standing behind a both a two-cylinder Honda and an eight-cylinder Chevy Impala. And then, there’s a large color photo of the 1973 Honda Civic, the car that changed the fortunes of not only that carmaker, but maybe the Balise company itself, said the company’s historian.

“During the 1973 gas crisis, we had a Chevrolet getting eight miles per gallon, and we had the Chevy Vega, which was supposed to be the savior of the American car industry, and what happens — the engines start blowing up on them,” Bobby Balise recalled. “All we had left besides the Chevys in the showroom was this little Honda Civic, which got great gas mileage; I really believe that saved the franchise to have the foresight to have two car lines.”

There have been many other fortuitous gambles and hard decisions made over the past 100 years, and by each generation, said Jeb Balise, who particularly likes telling stories about his grandfather, who he described as his best friend growing up.

“During the 1973 gas crisis, we had a Chevrolet getting eight miles per gallon, and we had the Chevy Vega, which was supposed to be the savior of the American car industry, and what happens — the engines start blowing up on them. All we had left besides the Chevys in the showroom was this little Honda Civic, which got great gas mileage; I really believe that saved the franchise to have the foresight to have two car lines.”

Recently made part of the inaugural class of the Massachusetts State Automobile Dealers Association’s New Car Dealer Hall of Fame, Paul Balise was a very hands-on manager who spent his career doing what he was doing at the start — fixing things, said Jeb, as one of his favorite stories about his grandfather reveals.

“It was the mid-’70s, I had just started working for my father, and we needed an electrician for … something, I don’t remember what. So we got an electrician, and they did the repair,” he recalled. “A week or two later, my father comes down with the bill, which was reasonable, and says, ‘what are you doing? — your grandfather does all the repairs around here.’

“It wasn’t to save money,” he went on. “That’s what my grandfather did; at 80, he was still a mechanic slash repairman slash everything else.”

Overall, what he did was set a tone, not just with his work ethic but with his ability to visualize opportunities and seize them.

Driving Forces

Slicing through the long history of the company, both Jeb and Bobby Balise said the decision to move off Main Street and eventually buy the Williams Dodge property on Columbus Avenue was a watershed moment and one that in many ways set the tone for all that was to follow.

“Paul knew he had to move off Main Street because there wasn’t enough room for cars and storage, and he took a gamble and bought that building,” said Bobby, whose father worked alongside Paul for many years as parts manager. “He hesitated on it, and with good reason; it was the height of the Depression, and no one knew what was going to happen and how long it was going to last. But he did it, and proved out to be a spectacular location for him, which we still own today.”

Bobby Balise is the Balise company’s unofficial historian

Bobby Balise is the Balise company’s unofficial historian, a role he’s carried out with great enthusiasm for almost a half-century.

Jeb agreed, and siad the deal might not have happened if his grandfather was left to his own instincts.

“The bank shows up and has a meeting with him and says, ‘Paul, we want to put you in this location,’” he said, recalling the stories told to him about a lease that would be for $600 a month. “My grandfather says he can’t afford it, and those at the bank say, ‘we’ll make sure you can afford it.’

“When the recession was over, the same bankers said, ‘Paul, we’re going to sell you the dealership — it’s time for you to buy it,’” he went on. “Again, he said, ‘I can’t afford it,’ and they basically said, ‘we’ll make it so you can afford it’; it was all on a handshake.”

Moving quickly through the past 40 years of the company’s history — the part less chronicled in those albums — the Balise name moved well beyond Springfield and Chevrolet, starting with that Honda franchise.

Today, the company has 21 new- and used-car dealerships in Western Mass., Rhode Island, and on Cape Cod, and a host of nameplates, foreign and domestic, including Chevy, Ford, Chrysler, Buick, GMC, Honda, Toyota, Nissan, Hyundai, Mazda, Kia, and many others.

And, as noted, it has diversified with collision-repair shops and car washes.

Diversification is necessary, he said, because Balise, with all the nameplates it sells, has more than adequate coverage in this region when it comes to sales. Opportunities for continued growth, therefore, lie more in other businesses related to the car.

But there are opportunities to add dealerships in other markets, including Rhode Island and Connecticut, he said, adding that the company is always looking for new opportunities.

Paul Balise moved his Chevy dealership to Columbus Avenue at the height of the Great Depression

Paul Balise moved his Chevy dealership to Columbus Avenue at the height of the Great Depression, a risky move that set the tone for successive generations of company leadership.

As he carries on the work of the generations that came before him, Jeb Balise said he learned a lot from both his father and grandfather — about the car business, yes, but more about business in general.

“They taught me about how to treat people,” he explained. “They genuinely cared about doing the right thing and helping people. That sounds cliché and corny, but that’s how they were.”

Those thoughts stay with him today as he leads an auto group at a time of ongoing change and consolidation — a time when repair of vehicles is just as important a part of the business — and one with better margins — than new-car sales.

“The level of competition is actually greater because they’re bigger dealerships and the throughput per dealership is much higher, which really helps the consumer because it means you have better selection wherever you end up. Between the Internet and technology and the level of competition with other dealers, it’s never been easier to buy a car.”

In that respect, not much has changed in 100 years, he said with a laugh, adding that, in most all other ways, the landscape has changed considerably.

Especially with regard to consolidation. Indeed, while the days of the single-franchise dealer are not officially over, they are certainly numbered.

“Consolidation continues, and bigger auto groups are getting even bigger,” he explained. “And the level of competition is actually greater because they’re bigger dealerships and the throughput per dealership is much higher, which really helps the consumer because it means you have better selection wherever you end up. Between the Internet and technology and the level of competition with other dealers, it’s never been easier to buy a car.”

There’s still plenty of room for more consolidation, he went on, adding that single dealerships are being bought by groups, and groups are being bought up by bigger groups.

“There’s a lot of buy-sell activity still happening at this period of time, and it usually starts happening when the market gets a little tighter,” he went on. “It’s caused by a few things — retirement age, getting tired, not having kids in the business who want the business, and other factors.”

Balise will not be one of the companies bought up by a larger group because it has no intention of being an acquisition target, said Jeb, adding that he rarely if ever even gets an inquiring call, because those who might pick up the phone know there’s no point in doing so.

“The goal is that we keep it a generational and growing business,” he explained. “We pride ourselves on being a significant part of the communities we operate in, and making a difference — in the lives of our associates as well as the customers and the general community.”

Past Is Prologue

As he continued flipping through the photo albums, Bobby Balise stopped at a page with a curious but poignant collection of items.

One is a photo of the company’s first tow truck, or wrecker, as they were called in those days — a 1948 Weaver with a three-ton boom and a hand crank. It’s symbolic of how the company has always been about more than merely selling cars.

There’s also a photo of James Balise looking not into the camera, but toward what the caption describes as “the unknown future.”

The caption under this photo from the company’s archives reads ‘James Balise looks into the unknown future — 1947.’

And then, there’s a recounting of what was said to Paul Balise by friend Bob Johnston as the two were playing a round with others on the recently opened Franconia Golf Club in Springfield and Paul was expressing considerable anxiety over his decision to buy the vacant auto dealership on Columbus Avenue.

“The clouds you so much dread are rich in mercies and shall break in blessings on your head,” Johnston supposedly said.

That’s a prescient thought and a harbinger for a company that has seen the sun shine on it over the years, but also has been able to make it rain — in all kinds of ways.

George O’Brien can be reached at [email protected]

Autos

Cruise Control

As the 2019 models continue to roll into area showrooms, area auto dealers report that sales remain brisk, at something approximating the levels of 2017, which was a very robust year for the industry. Meanwhile, a host of trends have continued or accelerated, including torrid sales of SUVs and trucks, a high volume of used-car transactions, and a heavy emphasis on improving the overall consumer experience.

Jeb Balise held his hand up with his thumb and forefinger barely a half-inch apart.

And then, for emphasis, he brought them even closer together.

“They’re down about that much,” Balise, president of Balise Motor Sales, told BusinessWest, referring to new car sales in 2018 (which still has a few months left, obviously) compared to a year ago.

Essentially, sales are flat, which, as Balise and others told us back at the start of this year, around President’s Day sales time, is a really good thing, because auto sales — an almost always accurate barometer when it comes to the national economy — have been rock solid the past several years.

“They’re just about the same as last year — down a tiny, tiny bit,” said Balise, adding that there is just that much less pent-up demand (resulting from cars, like their owners, living longer lives these days) this year than the past few. But there are still a number of other factors driving steady sales, including a still-booming economy, record-low unemployment, quality vehicles across the board, attractive incentives from the manufacturers, and more.

So sales are still humming, and Carla Cosenzi, president of the Tommy Car Auto Group, believes that at her four dealerships, sales are actually up from a year ago.

“We’re seeing an increase in 2018 over last year, and 2017 was a very good year for us,” she said, echoing Balise’s comments. “It’s not a significant increase, but an increase nonetheless, and 2017 was a really good year.”

Overall, 2018 has been a year when recent trends in the auto market have maintained their speed or even accelerated slightly. These include red hot used-car sales; white-hot SUV and truck sales (especially the former); growing interest in electric and hybrid vehicles, although they still comprise a very small segment of the market; and new levels of convenience for the consumer.

“We’re seeing an increase in 2018 over last year, and 2017 was a very good year for us. It’s not a significant increase, but an increase nonetheless, and 2017 was a really good year.”

Peter Wirth, co-owner of Mercedes-Benz of Springfield, which opened just over a year ago, says he’s seen all or most of the above at his dealership, a facility that has met or exceeded the lofty goals set for its first year of operation.

And that’s especially true in an often-overlooked but quite important segment of this business — the service department.

There are many qualitative measures for this, he said, especially the fact that the dealership recently hired its 12th technician, tripling the number it started with, for the 14-bay facility.

This surge in business in the service department stems from a variety of factors, from how long Mercedes models stay on the road to the fact that the next-closest dealership is in Hartford, said Wirth, adding that demand has risen steadily since the ceremonial grand-opening ribbon was cut — a clear sign that the new dealership has made its presence known.

“The floodgates opened, and in a good way,” he noted. “We’ve been at capacity for the next few days in the service department since the day we opened, and way we’re keeping up is by adding capacity so we can keep it at a reasonable timeframe for customers.”

“It’s been a 100% success story — we’ve never had to send a technician home early; we’ve never run out of work,” he went on. “Not just in the amount of work we’re getting, but also in the team we were able to build.”

For this issue and its focus on auto sales, BusinessWest talked with several area dealers to gauge the local market and the forces, well, driving it. Cars aren’t selling themselves, obviously, but in many respects this industry is on cruise control.

Pedal to the Metal

Those who spoke with BusinessWest said that, these days, the new models arrive at the dealership almost year round, unlike years ago, when all or most would be revealed in the early fall, to considerable fanfare.

Still, many new models do make their debuts as the leaves change colors, and thus this is a good time to take stock — literally and figuratively — of what’s happening at area dealerships and within this all-important sector.

Jeb Balise, seen here at his company’s Kia dealership on Riverdale Street

Jeb Balise, seen here at his company’s Kia dealership on Riverdale Street, says new-car sales are down just slightly from 2017, but still at a very high volume.

First and foremost, said Balise, this remains a buyer’s market in most all respects, even though demand remains high, especially for those trucks and SUVs. That’s because supply is also high as the manufacturers continue to make product and dealers try to move it — usually with good success.

“All of the manufacturers are producing plenty of cars, and demand is off just slightly from a year ago — just enough to put the consumer in the driver’s seat, if you will,” he told BusinessWest. “Incentives have never been better — even for SUVs.

“It’s not because there isn’t demand,” he went on, referring specifically to the SUV segment of the market. “It’s more because all the manufacturers have them now, and they’re trying to grab their piece of the pie.”

The seismic shift (another industry term) to SUVs has been ongoing for quite some time now, but it moved to an even higher gear in 2018.

Indeed, all those we spoke with said sales of SUVs now exceed those of cars (sedans) for almost all models they sell. Overall, Balise said, truck and SUV sales now account for roughly 60% of all vehicles sold and leased.

And this trend toward SUVs extends to some manufacturers renowned for their cars, such as Volkswagen and Volvo, said Cozenzi. Indeed, as she stood in the Volvo dealership recently acquired by the TommyCar Auto Group, she was surrounded by SUVs — small, medium, and large — on the small showroom floor.

They’re all selling, at Volvo and other dealerships, and especially the smaller SUVs, said Cosenzi, adding that they appeal to drivers of all ages for reasons ranging from accessibility (they’re easier to get in and out of, for most people, anyway) to decent gas mileage.

“The smaller SUVs, like the Rogue [Nissan] and the Tiguan [Volkswagen], continue to dominate,” she said. “The Rogue is the number-one-selling vehicle at the Nissan store, and it’s been that way for a few years now.”

Even Mercedes is now selling and leasing more SUVs than cars, said Wirth, adding that the company passed that milestone in 2017, and the arrow continues to move upward.

Still, there are plenty of sedans to be sold, said all those we spoke with, noting that, overall, car makers are turning out quality, easy-to-maintain products across the board, giving consumers plenty of often-hard choices to make, thus motivating the manufacturers to offer solid incentives.

And soon there will be an intriguing new choice, said Wirth, noting the arrival — probably by early next year — of the Mercedes A class, an entry-level luxury vehicle, complete with some different bells and whistles, that should bring that famous nameplate onto more driveways.

“This opens us up to a whole new customer,” he said. “You might have someone attracted to this car not because of the Mercedes-Benz design or the Mercedes-Benz safety or the brand image; it might be just because of the technology in the car. You can say, ‘hey, Mercedes, I’m cold,’ and the temperature will come up, or ‘hey, Mercedes, I’m hungry,’ and it will list the restaurants. And this is in the car that represents the entry point, not the $100,000 model.”

Staging a Coupe

Looking back on his first year of doing business in the Pioneer Valley, Peter Wirth, who previously managed a Mercedes dealership on Long Island, said this past 12 months have certainly been a learning experience.

Among the things he’s learned is that this market is somewhat more conservative than the one he left — a trait that shows up in higher volumes of used-car sales as compared to new-car transactions and more sales than leases — and also generally less aware that Mercedes is now more affordable and therefore more attainable than it has been historically because of the introduction of entry-level models.

Peter Wirth, seen here with members of the service team at Mercedes-Benz of Springfield

Peter Wirth, seen here with members of the service team at Mercedes-Benz of Springfield, says the company has exceeded all the goals it set for its first year of operation — especially in service.

“We still have some work to do on the matter of affordability,” he told BusinessWest, adding that perceptions about the Mercedes brand being beyond one’s reach remain despite more than ample evidence to the contrary. And that goes across the board, for passenger and commercial vehicles alike.

But he’s hoping that area residents will follow the lead of Jeff Bezos, who recently ordered 20,000 Sprinters (a cargo van made by Mercedes) for Amazon.

“I’m sure he did the math before he placed that order — I’m sure he sat down and looked at the life-cycle cost, the reliability, the down time, and everything else. He’s a pretty clever guy, and the fact that they committed to us says something.”

To Wirth, it says people need to look beyond the sticker price on the windshield (and Mercedes is competitive in that regard as well with many models) and look at the other ingredients that go into the equation, such as dependability, maintenance costs, convenience, and the sum of all these parts.

“We’ve been having the conversations regarding affordability, but also about how this is an amazing value proposition,” he noted. “We’re still working on it, but we’ve made great headway.”

Something Wirth didn’t need to learn, because he knew it already, is how important customer service and providing convenience are these days, especially to time-strapped, increasingly demanding customers.

“Time is money,” he said, adding that the dealership works to save customers some of that precious commodity in every way it can, from picking up a car bound for the service department at one’s home to getting them in and out of that service waiting room as soon as possible.

Cosenzi agreed, and said the TommyCar Auto Group has responded with something called Click, Drive, Buy, a new program that enables someone to buy or lease a vehicle almost entirely from home and on the internet.

“Especially at our Volkswagen store, we’re seeing a lot of our customers complete the entire transaction online and just come into the dealership to take delivery of the vehicle,” she explained. “I don’t think we anticipated that it would be as popular as it is, but people enjoy the convenience; they like buying a car this way. And it’s been popular with people of all ages.”

Gearing Up

As he brought his forefinger ever closer to his thumb while comparing sales this year to last, Balise emphasized, again, that anything at or near last year’s mark is quite good.

And while he didn’t want to make too many projections about 2019, because things can change quickly, as history shows, he implied that he may well be doing the same thing with his fingers this time next year.

That’s because the basic laws of supply and demand — not to mention an economy still in high gear — should keep this industry operating in what amounts to the status quo.

And that’s a high-octane sales climate.

George O’Brien can be reached at [email protected]

Autos

Expansion Mode

Carla Cosenzi says the recently acquired Volvo dealership in South Deerfield is a perfect fit for the TommyCar Auto group.

Carla Cosenzi says the recently acquired Volvo dealership in South Deerfield is a perfect fit for the TommyCar Auto group.

Carla Cosenzi says that, like most companies in its category, the TommyCar Auto Group is always on the lookout for possible additions to the portfolio of dealerships.

But growth for the sake of growth is not what this venture — started by her father, the late Tom Consenzi, and taken to a new level by Carla and her brother, Tom — is looking for.

“It’s important for us to have the right brand at the right time and the right location moreso than just looking to grow,” she told BusinessWest, adding that all those boxes could certainly be checked with the company’s recent acquisition of Pioneer Volvo in South Deerfield.

Right location? Check. The dealership is only a few miles north on I-91 from the group’s other facilities — Northampton Volkswagen and the adjacent Country Hyundai, as well as Country Nissan on Route 9 in Hadley.

Right brand? Check. Volvo has always been renowned for its quality and focus on safety, and it has recently introduced several new models, including a small SUV, the XC40, that is turning heads in the industry.

Right time? Check. Auto sales in 2018 are just slightly off the levels set in 2017 — although the TommyCar Auto Group has registered growth over that span — but overall volume remains at very high levels.

Overall, this acquisition is solid in every respect, said Cozenzi, adding that that it gives the TommyCar Auto Group its first real entry into the luxury-car bracket, meaning a brand that won’t really compete with the three sold just down the interstate.

Meanwhile, the group’s size and economies of scale will enable it to give the Volvo dealership greater visibility and opportunities to grow.

“It’s a small dealership, and it was family-owned and operated, so we’re going to continue the same values they had,” she explained. “But since we’re a bit of a larger group, we have the ability to add more amenities than they were able to provide, but with the same core values.

“We’ll grow the brand — we’ll give the brand more exposure through advertising,” she went on. “And since we’re a larger group with more of a following, we’ll be able to attract more people to the dealership, and to Volvo.”

Given all this, it’s understandable why the TommyCar Auto Group has had its eye on the Volvo dealership for some time, and also why it moved quickly and decisively when the family-owned operation came on the market earlier this year.

“It’s a small dealership, and it was family-owned and operated, so we’re going to continue the same values they had. But since we’re a bit of a larger group, we have the ability to add more amenities than they were able to provide, but with the same core values.”

“This is a brand that we’ve been looking at for a long time because it fits in well with the other manufacturers we have in the group, it’s a great location, and it’s a perfect size for us,” she explained. “We’re really attracted to Volvo and everything it stands for in terms of luxury and convenience it provides to customers, the value of the brand, and the safety of the vehicle.”

Cozenzi said the dealership in Deerfield is, indeed, small compared to most these days, and not exactly modern. However, it is comfortable and well-appointed. She said it is likely the company will renovate it in the short term and replace it in the long term, meaning over the next several years.

In the meantime, as she said, it is a solid addition to the portfolio, a brand with a number of redesigned models, cars, and SUVs alike.

“So it’s an exciting time for us to be getting involved with the brand,” said Cosenzi, citing the XC 40 as one example of a Volvo model in strong demand. “I’m coming to learn the brand, and it’s clear that they’re very innovative.”

As an example, she noted ‘Care by Volvo,’ a comprehensive package of services that brings new layers of convenience to customers.

“They take care of the essentials when they lease you a vehicle, including insurance, maintenance, repairs, a concierge service, and more,” she said. “So you can see them changing with the times, and it’s exciting to be partners with an manufacturer that’s so on edge with what’s happening.”

Like she said … the right brand and the right time — and the right location.

— George O’Brien

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