There are currently approximately 353 car dealerships for new and used cars. The list includes 23 importers that control the market. All new car dealerships are, in fact, franchisers of these importers. In addition, 5 companies specialize in personal car import. This data does not include unauthorized car dealerships.
The car dealership industry can be segmented as follows:
New car sales
Used cars from rental and lease companies.
Used car sales.
The industry is highly competitive. Competition stems mainly from a large supply of used cars in recent years. Because of operational leasing expansion, many dealerships specialize in new car sales that include a warranty, good financing terms, and a wide selection.
Customers: Defining the Target Market and Its Size, Market Segmenting
The industry is comprised of a number of sub-divisions:
- Occasional/private customers interested in purchasing/trading/selling a car.
- Organizations usually purchase their fleets directly from importers or large dealerships and receive special payment terms.
- Customers interested in special vehicles such as collector’s items, Jeeps, SUV’s, pick up trucks, etc.
- Customers interested in purchasing or selling an agricultural vehicle or tractor.
- Operational leasing is the acceptable intermediary method between purchasing and renting a vehicle.
Drivers are offered a rental car for a period of 36 months with a purchase option at the end of the rental period at a fixed price, or the option of returning the vehicle and continuing to lease a new vehicle.
Because the industry is highly competitive, car dealerships must invest resources in marketing and advertising.
- Service and credibility are the most effective parameter (in cost/profit relation) Satisfied customers create a reputation for the dealership, and new potential customers arrive with the intent to buy with a relatively low level of concern.
- Billboard advertising- placing billboards in the sales lot area and using direction signs in the area are also an effective marketing tool
- Advertising the business and its promotions in local print and specialty guides.
- Business owners advertise on bulletin boards by displaying a small selection ofcars while emphasizing the car’s exclusiveness. The purpose of advertising is primarily to receive information about a potential customer and convince them to come to the lot in order to examine the vehicle or to offer them another vehicle.
- Importers and new car dealerships advertise in all types of media, including radio and television. Ads emphasize the vehicle’s advantages.
- Financing promotions- most importers and dealers are associated with financing organizations. This allows them to offer financing to potential customers, sometimes up to 100% of the vehicle’s cost.
- Trade-in departments- most large dealerships and importers have a trade in department, willing under certain circumstances to purchase the customer’s car for up to list price.
Car sales vendors are segmented as follows:
Importers-There are 14 companies in Israel controlling most new vehicle importation. These importers own a chain of agencies/franchisers/daughter companies scattered throughout the country.
Large Rental and leasing companies supply relatively new used cars.
The government, IDF, and other organizations sell their cars by tenders. These organizations replace their vehicle fleets once every 3-5 years and/or after cars have driven a certain amount of Kilometers.
Private car sales
The Superintendent of Transportation at the Ministry of Transportation is in charge of this branch. In order to import vehicles for sale, the importer is required to receive authorization from the Commissioner of Import at the Ministry of Transportation. Establishment of a used car dealership is conditioned upon the following:
Local authority licensing. Investment in appropriating the lot for vehicle display. The lot’s area should be 1-3 Dunam. The lot should be mostly paved. . The lot should be fenced in, secured, and well lit. Renovation and appropriation of an office construction.
Industry Revenue and Profitability
Revenue in the industry stems from three sources: Profit for sales of cars owned by the business, commission for mediation of car sale transactions, and other services related to car sales.
Raw profit in used car sales ranges in average between 5-15%, depending on the type of car and its condition.
Raw profit for new car sales as an agent acting on behalf of the importer is 2-5%.
Raw profit of importers is confidential.
Typical Terms of Payment
Customers typically pay in cash. The customer must get supplemental financing (a bank loan) and complete car payment prior to purchase. In many cases, the dealership is associated with financing organizations and aids the customer in the financing process. When selling used cars from rental/leasing, the buyer is offered loans for car purchase at good financing terms. Some dealerships allow check or credit card installments.
Licensing, Certification, and Relevant Regulations:
The importer is required to receive authorization from the Commissioner of Import at the Ministry of Transportation.
Local authority licensing is required in addition to Ministry of Transportation authorization.
- Car dealership insurance for the vehicle while driven by the dealer and the buyer. When the vehicle is sold/ demised, the original policy is void, and the vehicle is exposed to third party claims due to car accidents, and is not covered by comprehensive insurance in case of theft or damages.
- Goods under supervision insurance.
Ø In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.
- Ministry of Transportation, Jerusalem- Superintendent of Transportation- 02-6228600
- Ministry of Transportation, Jerusalem- Commissioner of Car Rental Companies- 02-6228211
- Ministry of Transportation, Jerusalem- Commissioner of Importation 03-5657117
- Israeli Vehicle Imports Union, Derech Petach Tikva 76, Tel-Aviv, 67134. Phone: 5622005 – 03 Email: [email protected]
- North American Automobile Trade Association website:www.naata.org, worldwide import and export of vehicles.
Useful and comprehensive information on various issues, such as: Customs, price lists, and organizations dealing with cars and transportation managements can be found at: http://mycar.co.il/
It is recommended to inquire into the option of acquiring franchise/representation rights for a new vehicle importer.
It is recommended to consult with your local Business Development Center regarding business establishment and operations.