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Shale Dollars Fuel Auto Sales in Columbiana County
SALEM, Ohio -- As development ramps up in the Utica shale, auto dealers in Columbiana County are selling more cars and trucks and enjoying higher profits.
So say Tom Poponak and Todd Dauterman, general managers for Donnell Ford in Salem and Columbiana Ford, respectively. Both dealerships report increased sales, especially trucks.
Stadium GM in Salem and Power GM in East Liverpool also report trucks make up the bulk of their sales, with the Chevrolet Silverado extended cab among the best-selling models. Power sales manager Russell Hardenburgh credits GM rebates on 2012 models and expects truck sales in the second half of the year to double the first half.
"Every year, they come out with the big rebates at the end to try to get rid of the year-end models," Hardenburgh says. "So much so that we actually went out to the other dealers and bought some more trucks so that we'd have enough to sell."
Rebates range from $7,000 to $12,000 off the ticket price, Hardenburgh says. He also touts the gas mileage the new truck models achieve, with some getting 21 mpg highway. With gas prices hovering between $3.50 and $4 in the county, mileage remains a concern among buyers, he says.
Trucks constitute 60% of Power's sales, and although sales this year are slightly behind 2011, "Last year was record-breaking sales for this area, so it's going to still be a very good month," Hardenburgh notes.
Retail sales are also up as landowners who leased the mineral rights to their properties enjoy a windfall, says Columbiana Ford's Dauterman. While new vehicles make up just 30% of Columbiana Ford's sales, sales of new vehicle were up 20% by the end of July, and up 10% for used vehicles, Dauterman reports. To keep pace with demand, the dealership had to double its inventory this year and is looking forward to 2013 models of the Ford Escape and Fusion to maintain its pace.
"I think the shale-oil has produced a lot of income and money here, and new vehicle sales are definitely up because of the oil industry," Dauterman says. "People who got the windfall finally get to buy the new car that they deserve."
In Salem, Donnell Ford recently nearly doubled its inventory of Super Duty trucks to 20, up from 12, says general manager Tom Poponak. Of that inventory, 25% are fitted with a system that allows its engine to use compressed natural gas (CNG). The CNG upfit package costs $350 while the conversion costs $10,000, Poponak says. Once the vehicle has the upfit, the owner can get the conversion any time.
"We've done five of them now for customers and it's a really nice upfit," Poponak says. "It's a really clean operation. You just flip a switch and you can go back and forth from natural gas to gasoline."
The upfit package adapts the cylinders in the engine of a vehicle to natural gas, which burns hotter than regular gasoline. Longer fuel doors on the Super Duty trucks allow for two fuel intakes: one for gasoline, the other natural gas.
The benefit of the conversion is that the fuel economy for CNG "almost doubles" that of regular gasoline at half the price, Poponak says. Data from the International Association for Natural Gas Vehicles show CNG is typically priced one-third below the cost of gasoline and diesel, reduces particulate matter emissions by 94%, carbon monoxide emissions by 75%, nitrogen oxide emissions by up to 49% and carbon dioxide emissions by 25%. Market pricing at the time forecast the retail cost of the fuel up to $2 per gasoline gallon equivalent (GGE).
"Everyone sees that the market is going there, especially in our area because we're sitting right on it," Poponak says. "If you're a high-mileage diver and gas prices increase, I foresee it going more and more. It could become 25% of our market in the next three years."
Poponak doesn't see many drill rig workers coming to his lot to buy trucks, but the companies themselves, such as Chesapeake, have purchased from his commercial vehicle inventory, he says. Such vehicles include dump trucks, stake and utility body vehicles and box vans.
"We've always just tried to maybe have two or three entry-level vehicles and then build to order," Poponak says. "Now, we're stocking five to eight pieces."
Stadium GM is also stocking more trucks, adding 25% to its fleet this year as more shale gas drilling workers move into the area, says general manager Mike Hudock. Stadium's service department also saw a 15% rise over last year, he says. With 2013 models rolling into showrooms and a growing shale industry, Hudock says Stadium will have to add more inventory next year to keep pace with demand.
"Columbiana County's got so much going on right now," Hudock says. "I think it's the fastest moving county in Ohio. There's a lot of new business happening down here."
That new business is one reason Stadium decided to invest just above $3 million in a new showroom and service building at its West State Street address. Construction of the 34,000-square-foot building began in February with completion set for the middle of this month, Hudock says.
"A lot of GM stores are doing some type of remodel or face-image upgrade," Hudock says. "Our buildings were at their life expectancy, so we decided to invest big in Columbiana County and build a whole new building. We'll be the only dealer in the Valley to have all lines from GM under one roof at one location."
EDITOR'S NOTE: This story was first published in the September edition of The Business Journal. CLICK HERE to subscribe.
Copyright 2012 The Business Journal, Youngstown, Ohio.