Auto Trends Magazine » Fiat 500 Sales Are 2011′s Mission Impossible

[sjmst]

See below.
The claim is that Fiat Dealers will lose money on every Fiat 500 they sell. Now, while the article makes sense on the surface, some things don't. All the dealers who got the franchise went out of their way to get it. These, presumably, are the top performers. And, I think I am on firm ground here, they are not stupid. They must have carefully reviewed a business plan and took a calculated risk...and decided that in the long run this would pay off.
Thoughts?

http://www.autotrends.org/fiat-500-sales-are-2011s-mission-impossible/ 

Excerpt:

"Poking Holes in Fiat’s 500 Sales Plan
First, let’s assume that Fiat can overcome old memories about poor product quality. Next, let’s assume that the new 500 manages to capture North America’s attention in a way that the Fiesta, MINI, and Mazda2 can not.

The Fiat 500 is going to be an entry level car, which means consumers are going to expect discounting. According to a quick check of the MINI’s Edmunds.com True Market Value®, it looks like MINI dealers are managing to sell their cars for about $500 over invoice (with different models and markets being slightly higher). Keep in mind, these are premium vehicles being sold at BMW dealerships. If MINI can only get $500 over invoice, Fiat has their work cut out for them to hold a similar price.

For sake of argument, we’ll say that Fiat 500s sell for the same price. With dealer holdback (the additional money dealers get from manufacturers to pay for things like floor-plan financing, overhead, etc.) being about $450 per car (3% of invoice), dealers can realistically expect about $950 in gross profit on every new Fiat 500. According to the 2010 National Auto Dealers Association (NADA) State of the Industry report, the average low-volume auto dealer spends $661 on advertising for every new vehicle they sell.


As you might have guessed by now, selling 25 brand new Fiat 500s a month is the definition of “low volume.” A Fiat dealer is going to have to spend $660 dollars on advertising to turn around and earn about $950 in gross profits…and this doesn’t even begin to cover other overhead expenses, building and/or remodeling a new showroom studio, dedicated Fiat sales and customer service staff, etc."