Car Dealers Go Downtown

If your car ever breaks down in New York City, you could do worse than to have it towed to the Mercedes-Benz dealer on the lower west side of Manhattan. The newly opened, $220-million glass palace looks like -- and is -- a monument to modern European design, but it also serves as a full-service dealer.

The seven-acre facility is the latest salvo in a dealer war unfolding in what might seem an unlikely location: Manhattan.

"New York really has become car friendly, but we don't think of it as car friendly," says Mark Schienberg, president of the Greater New York Automobile Dealers Association.

Premium brands like Audi, Ferrari, and BMW have led the charge with new or greatly expanded showrooms, and mid-market automakers are following suit in New York and other big cities. Fiat has opened a small showroom in the high-fashion SoHo district, and on the West Coast, Nissan and Infiniti are working with Roger Penske to move into a 195,000-square-foot complex in downtown San Francisco.

The push to open these city stores is all the more notable for the fact that dealers in other parts of the country have taken such a beating, particularly in rural areas. Chrysler, for instance, is working to increase its urban presence by 60 percent but has slashed its overall network. It celebrated the opening of a five-story dealership in downtown Los Angeles early this year even as it wrapped up arbitration cases against California stores it rejected in Glendale, Eureka, and La Quinta. Across all brands, more than 1500 dealers closed in the wake of the recession. Still, a move downtown is hardly the solution for most struggling franchises.

"City dealerships are losers and have been forever," says Martin Swig, who pioneered the suburban auto mall concept in the 1980s. Swig and others argue that the factors that drove dealers out of cities decades ago -- scarce real estate, sky-high insurance, and unfriendly municipal authorities -- still deter private investors.

"New York has been and always will be difficult due to traffic and space limitations," says Barry Frieder, president of Potamkin Automotive, one of the city's oldest and largest dealer groups.

Many Manhattan dealers rely on some sort of automaker subsidy, and some, like the Mercedes store, are corporate owned.

"The manufacturers are doing it for reasons other than economic return," Swig says.

So, why bother?

"New York is New York," says Frieder. "Everyone wants to be seen in the city."

This seven-acre, Mercedes-owned facility in Manhattan replaces a location near the Lincoln Tunnel and will serve nearly 30,000 customers. It will also serve as a test bed for new dealer programs.

732
Number of dealerships in New York City and its surrounding suburbs -- more than in any other area of the country.

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