AUTO/21″/dt1st/LK2nd By CHRISTOPHER WOODARD Staff Reporter AutoNation USA has opened a used-car superstore in Oxnard as part of a push into Southern California that is expected to bring nine new stores to L.A. County by the end of the year. But don’t expect the mega-dealer to shake up the local retail automotive market just yet. Used-car sales have hit the skids as aggressive factory discounts and rebates close the gap between the prices of new and used models. “An awful lot of dealers are willing to cut new-car profits down to nothing to do business in other areas (such as service, financing and automotive accessories),” said Art Spinella, a consultant with CNW Marketing Research in Bandon, Ore. In addition, manufacturers are offering rebates of $1,000 to $1,500 per new vehicle, and low-interest loans are allowing consumers in some cases to find lower monthly payments for new cars than for used models. The result is a cut-rate pricing environment that makes used cars less attractive. Republic Industries Inc., AutoNation’s parent, recently warned Wall Street that fourth-quarter earnings would fall 5 cents short of analysts’ expectations, due in part to softer used-car sales at its AutoNation superstores. In an attempt to boost sales, Republic, the nation’s largest car dealer, is adding more older, less-expensive used cars to its AutoNation inventory, but the strategy will open the company to more competition from mom and pop dealers that also sell older products, said Spinella. “When they were concentrating on cars that were one to four years old, they were competing with the new-car dealers,” he said. “But when they start selling cars four, five or six years old, they’re now competing with 65,000 independent dealers.” The Nov. 30 opening of the Oxnard store follows the opening of similar stores in Irvine and Rancho Cucamonga. Ron Blomquist, Western regional manager for AutoNation, said the company will roll out 16 new stores in California, including nine in L.A. County, by the end of 1999. One of those stores will be in the San Fernando Valley, most likely in the Valley’s southern end, but the company has not yet announced a location. The move is part of a nationwide push that will see the number of AutoNation megastores grow from 40 to 85 by the end of the year. The market in Southern California is expected to be intensely competitive, but Blomquist said the company is undaunted. “We think AutoNation will do well in any market in any state in the country,” he said. AutoNation’s formula is to provide a large inventory of cars, a no-haggle pricing policy, a 99-day warranty and an inspection program aimed at sorting out the lemons. The Oxnard location, on the south side of the Ventura (101) Freeway at 2001 Lockwood St., features a selection of 625 cars, a supervised play area for children, a vehicle accessory store and a service center. It is expected to draw customers mostly within a 15-mile radius of the store. While AutoNation’s entry into greater L.A. seems a bit ill timed, the company’s long-term prospects are good, said Chris Denove, director of consulting for J.D. Powers & Associates. Even though used-car sales have softened, Denove sees the downturn as a temporary blip. He expects the demand for late-model cars to continue to grow while the popularity of automobile leasing will ensure a steady supply of newer used cars to meet the demand. “AutoNation is well positioned within a growing market,” he said. “AutoNation has strong and innovative customer service policies. It’s probably going to raise the bar for used-vehicle departments at new-car dealers.” Also, if the used-car sales continue to be disappointing, the company can simply retool its AutoNation stores, as it has done in some areas of the country, to sell new cars as well, he said. Republic is moving aggressively to acquire new-car dealerships. The company recently announced it will pay $230 million to buy 10 dealer groups in five states, including 13 franchises in California. Fort Lauderdale, Fla.-based Republic, run by billionaire and former Blockbuster Video executive Wayne Huizenga, now owns 361 new-car franchises in addition to its 40 used-car megastores. Republic also owns a solid-waste subsidiary and the National, Alamo and CarTemps USA car-rental companies. Jim Callahan, senior analyst for Dohring Co., a Glendale-based market research group, said AutoNation has a lot of fine tuning to do before the megastore concept will prosper in Southern California. A study on automotive superstores that his company conducted in Houston late last year found that used-car super centers were appealing to customers, but many prospective buyers found that their expectations for better price and selection were not met once they visited a store. Also, Dohring’s study found that superstores had a harder time closing deals than did competing dealers. “At this point, it appears they will stick with the old formula, but they may have to re-evaluate their position at some point,” he said.
