Automobile Dealers
& Gasoline Service Stations

Today, motor vehicles play a central role within the typical American household. The vast majority of Americans travel to work by private motor vehicle. Motor vehicles are one of the most widely owned assets, with more than 85 percent of U.S. households owning one or more vehicles. Costs related to motor vehicles—purchases, operating expenses and repairs, and insurance—account for a sizeable part of the typical household’s budget. Loans related to vehicle purchases are one of the most common forms of household borrowing, and monthly payments important in analyzing consumer expenditure patterns.

Overview of Demand and Supply Conditions

This segment of retail trade includes motor vehicle dealers (both new and used), auto and home supply stores, gasoline service stations, boat dealers, recreational vehicle dealers (e.g., campers, motor homes, travel trailers), motorcycle dealers, and other dealers (e.g., aircraft dealers, dunebuggies, gocarts, snowmobiles, and utility trailers). Combined, this retail trade category totaled $16.4 billion in sales; approximately 31 percent of all retail sales in Washington State in 1997. The category is dominated by new car dealers and gasoline stations, which account for more than three-fourths of all sales; the remaining quarter of sales is split between auto parts stores, used car dealers, and other motor vehicle dealers.

Auto dealers

Affordability surrounds the consumer demand for motor vehicles. Key factors shaping motor vehicle affordability include earnings, interest rates, sticker prices for new vehicles, incentives, and lease deals. The pressure within the industry continues to be one of either holding the line on prices or promoting sales. In recent years, leasing has become a principal marketing tool employed by the automobile industry to promote sales. Currently, leasing accounts for more than 30 percent of all auto retail activity; up from about 7 percent only fifteen years ago.

With the proliferation of new-car leasing arrangements, the structure of auto retailing has undergone significant transformation in recent years. Typically, new cars are leased for 2 or 3 years, after which they are returned to the dealer, creating a large supply of late-model used vehicles. As a result, new-car dealers currently are selling proportionately more used cars than ever before. Another factor driving change within the auto retail industry is the rise of high-volume automobile "superstores." The superstore, first introduced in 1993, is one of the fastest growing trends in the auto retail industry. Superstores offer changes to traditional dealers in being publicly-owned national chains offering a huge selection of vehicles often at no-haggle prices. Their sales staff is on salary rather than commission and superstores’ financial resources provide access to the latest technologies.

Figure 1

Annual Retail Sales of Auto Dealers & Service Stations, 1986-1998
(Billions of 1998 dollars)
Source: U.S. Bureau of Census

For more detail of above graphic

Gasoline service stations

Gasoline service stations are retailers whose revenue comes primarily from the sale of gasoline products. Many stations, however, sell convenience goods as well. According to the U.S. Department of Energy, average daily demand for gasoline in 1999 was 8.4 million barrels per day, up 1.5 percent from the previous year. Demand has been growing steadily, averaging 1.6 percent growth per year during the 1990s, largely driven by consumer demand. Consumer expenditures on gasoline decreased by 10.5 percent to $112.9 billion from 1997 to 1998. As a percentage of disposable income, consumer expenditure on gasoline is also shrinking, from .4 percent in 1980 to 1.8 percent in 1998.

Clearly, there are offsetting factors at play in gasoline demand growth. While rising population and increasing vehicle numbers and related vehicle miles have tended to increase consumption, other factors, particularly more fuel-efficient vehicles, have mitigated the increase. The total number of vehicle miles traveled increased from 1,527 billion miles in 1980 to 2,560 billion in 1997, a 68 percent increase. To a large extent, the increased number of vehicle miles is directly related to the sharp increase in the number of vehicles over the last two decades. The number of registered vehicles rose from 139 million in 1980 to 201 million in 1997, a 45 percent increase. Factors contributing to such a dramatic rise in registered vehicles include the growing size of the adult population, the proportion of families owning more than one vehicle, and geographic shifts (i.e., more people living in sprawling suburbs than in previous decades).

The gasoline service station industry is very fragmented and intensely competitive. Gasoline stations, in general, are marginally profitable. This has led to gasoline stations diversifying into other types of businesses like convenience stores and fast food restaurants. In addition, major brands have started to merge or form alliances at the retail level to reduce costs. As a result, a number of independent gasoline marketers have gone out of business and many branded retailers have consolidated operations. The total number of gasoline service stations has declined since the early 1980s.

Figure 2

Composition of Retail Sales in Washington State, 1997
Source: U.S. Bureau of Census, 1997 Economic Census, Retail Trade, Washington State

For more detail of above graphic

Notes: Based on the new North American Industry Classification System (NAICS); among the changes, eating and drinking places were re-classified to the accommodation & foodservices sector.

Total 1997 retail sales in Washington was $52.473 billion.

Current Conditions

Automobile dealers and gasoline service stations category in Washington consists of eight three-digit SIC sub-categories: motor vehicle dealers—new and used (SIC 551); motor vehicle dealers—used only (SIC 552); auto and home supply stores (SIC 553); gasoline service stations (SIC 554); boat dealers (SIC 555); recreational vehicle dealers (SIC 556); motorcycle dealers (SIC 557); and automobile dealers—not elsewhere classified (SIC 559). In 1998, 3,600 automobile dealers and gasoline service stations establishments employed 47,420 workers statewide. Of the eight retail trade major categories (SIC 2-digit), automobile dealers and gasoline service stations employs the fourth largest workforce in Washington; approximately 10 percent of the total 460,670 retail trade workers are in automobile dealers and gasoline service stations. From the latest economic census (1997), automobile dealers and gasoline service stations account for about 31 percent of total Washington State retail sales.

Figure 3

Number of Establishments in Washington Automotive Dealers & Gasoline Service Stations, 1981-1998
Source: Washington Employment Security Department

For more detail of above graphic

The largest sub-category is automobile dealers, representing about one-fourth of all establishments and one-half of all employment. In general, the number of automobile dealer establishments is steady; whereas gasoline service stations establishments have sharply declined. Since 1981, the number of gasoline service stations has decline by nearly one fourth to 1,360 units.

In contrast to establishment numbers, automobile dealer and gasoline service station employment increased by more than one-half over the 1981-1998 period. Employment in automobile dealers nearly doubled; auto supply store employment increased by nearly two-thirds, while gasoline service station employment increased by one fourth.

Figure 4

Washington Automotive Dealers & Gasoline Service Stations Workers,
1981-1998
Source: Employment Security Department

For more detail of above graphic

Automobile dealers and gasoline service stations in Washington are largely composed of small companies. About 69 percent of all automobile dealer and gasoline service station workers are found in establishments with less than 100 employees, compared with 49 percent of all retail trade workers and 40 percent of all state nonfarm workers.

Figure 5

Size of Establishments of Washington Automotive Dealers & Gasoline Service Stations, 1998
Source: Washington Employment Security Department

For more detail of above graphic

In 1998, average covered wages for automobile dealer and gasoline service station workers was $28,500, compared with $17,908 for all retail trade workers and $33,922 for all nonfarm workers in Washington. Automobile dealer and gasoline service station workers rank first in wages and salaries among all retail trade workers. Unlike many other retail workers, automobile dealer and gasoline service station employees have gained ground in real wage growth (i.e., without inflation) between 1981 and 1998.

Table 1

Real Average Wages: Washington Covered Auto Dealers & Gasoline Stations Workers, 1981-1998 ($1998)
Sources: Washington Employment Security Department,
U.S. Bureau of Economic Analysis

The distribution of hourly wages for automobile dealer and gasoline service station workers is bi-polor, with a significant portion earning less than $10 per hour and one-fifth of all workers earning more than $20 per hour. Fourty-three percent of all workers in automobile dealer and gasoline service stations earn $10 or less per hour, compared with 30 percent of all nonfarm workers in the state.

Figure 6

Hourly Wages for Washington Automotive Dealers & Gasoline Service Stations Workers, 1997
Source: Washington Employment Security Department

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The labor force in automobile dealer and gasoline service stations are dominated by sales workers, maintenance and repair workers, and laborers. Sales persons and mechanics are the most common occupations within automobile dealer and gasoline service stations.

Table 2

Occupational Profile of Automobile Dealer & Gasoline Station Workers in Washington, 1998 and 2008
Source: Washington Employment Security Department

Outlook

The impressive sales gains within the automobile dealer and gasoline station services category have been driven by a strong consumer confidence, low interest rates and a robust economy. It is expected that the market for automobiles in Washington will continue to steadily increase over the next ten years. The recent passage of I-695, eliminating the state ad valorem tax on motor vehicles, has in particular boosted motor vehicle sales within short term. This continual uptick in sales is translated into new hires. In Washington State, employment in automobile dealer and gasoline station services are projected to increase by about one-sixth to 25,920 workers by 2020.

Figure 7

Washington Auto Dealers & Service Station Wage & Salary Employment Forecast, 2000-2020
Sources: Washington Office of Financial Management,
Washington Employment Security Department

For more detail of above graphic

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