Alpine RV in Morgan Hill, Calif., is the latest victim of credit market and general economic woes that have led to a string of auto dealership closures in this area south of San Francisco, according to the Gilroy Dispatch.
The recreational vehicle dealership that has been in business on Condit Road since 2006 closed its doors July 8. About $10 million in new and used inventory was cleared from the dealer’s lot and will likely be sold to other dealers, according to Alpine RV owner Michael Jacque.
“The economy has been a challenge,” Jacque said. He specifically pointed to the bank’s “unreasonable” tightening of credit and financing requirements since October that made it difficult for him to continue replenishing his stock of new vehicles.
“Our bank is now exiting the RV business and they’re no longer forthcoming” with financing for more floor models, said Jacque, who has been an RV dealer for nearly 30 years.
Jacque was at the former Alpine RV site Monday afternoon (July 20) cleaning out the dealership’s offices.
He hopes the 35 employees of Alpine RV will find new jobs with another RV dealer that might take over at the same location. One such company is Pan Pacific RV Centers Inc., which is based in the Sacramento area.
“We are contemplating coming to the (Morgan Hill) marketplace,” Pan Pacific President Jim Shields said. The most likely location for a dealership would be the former site of Alpine RV as the necessary infrastructure is already in place. But he noted that Pan Pacific is “at the mercy of the bank,” and if the company is able to acquire the RV shop it would not be able to open it for at least another 60 days.
Sales have declined steadily and significantly at Alpine RV since its peak in 2007. That year, the dealer made about $56 million in sales of new and used RVs. In 2008, sales dropped to about $38 million, and this year it was on pace to make about $18 million in sales, Jacque said.
That echoes nationwide trends. In the first four months of 2009, RV manufacturers shipped 43,700 RVs to dealers – a decline of 61.7% in the same time period last year, according to the Recreation Vehicle Industry Association (RVIA). In 2008, about 237,000 RVs were shipped to dealers – about 33% less than were shipped in 2007.
Sales of smaller RVs, particularly towable models, were still strong at Alpine RV when it closed, Jacque noted.
“It was just difficult to ride out the storm” that began in early 2008, Jacque said.
The city of Morgan Hill has suffered from the lagging sales of RVs, and automobiles in general. Sales tax revenues from transportation-related sales — which include sales of new and used cars, RVs, motorcycles and driving fuel — have taken a “nose-dive” the last two years, according to City Manager Ed Tewes.
At their peak in the middle of 2007, sales tax revenues in the transportation category topped out at $2.4 million. In the first quarter of 2009, the most recent date for which information is available, those revenues totaled about $1.6 million.
Transportation sales tax revenues typically account for a third of all of the city’s sales tax proceeds. “We are very dependent on that sector,” Tewes said.
The city was dealt a substantial blow to its transportation sales tax revenues when Courtesy Chevrolet closed in April. Furthermore, down the road in Gilroy, the Pontiac Buick and Ford Lincoln Mercury stores closed in mid-February.
Although Tewes said he cannot legally disclose how much sales tax revenue an individual business generates, he said Alpine RV has “consistently” been one of the city’s top 10 sales tax producers.
And the city had an “economic incentive agreement” with Alpine to refund a portion of the sales tax it generated if it met certain overall sales minimums each year, according to city Business and Housing Services Director Garrett Toy. The city receives 1% of all sales taxes generated by businesses in the city limits.
Under the agreement with Alpine, the dealership received a rebate from the city for almost $56,000 earlier this year, and it agreed to make property improvements on its Condit Road frontage. Those improvements included the installation of a wrought-iron fence and decorative landscaping in front of the lot, Jacque said.
The city had a similar agreement with the previous occupant of the same lot, the Dan Gamel RV Center. They also have an existing similar agreement with the Ford Store of Morgan Hill, which so far has given an estimated $155,000 tax break to the auto retailer.
As might be expected, sales of recreational vehicles have plummeted in the past year as the recession deepened, credit dried up and consumers concentrated on saving money.
But over the past couple of months, some RV dealers in California have begun to experience something unexpected – an uptick in the number of savvy buyers drawn to their sales lots by discounts. Like businesses looking to lure customers, dealers are cutting prices to move their products. Industry experts say that makes this the best time in 30 years to buy an RV, according to the Santa Cruz Sentinel.
“This is the time. It’s a golden opportunity,” said Jim Eberhardt, sales anager at McMahon’s RV Santa Cruz, located in Scotts Valley. “This is a buyers’ market, and the dealers realize we have to take less of a profit.”
Eberhardt said foot traffic has increased in the past few months, and that sales have started to creep up, as well. Recently he’s sold RVs at 10% to 15% below the sticker price, although in-the-know consumers come in asking for much more of a discount.
“People want to buy motorhomes for less than we pay for them,” he said, “but the dealer has to make a living.”
Michael Jacque, president of Morgan Hill-based Alpine RV, has had similar experiences, with people coming in saying “make me a deal I can’t refuse,” he said.
“If you have the means, without a doubt this is the best time to buy an RV,” Jacque said.
Sales of RVs, from lower-priced towables to luxurious land yachts, dropped almost 41% in California between November 2008 and the previous year, according to Statistical Surveys Inc., which tracks RV retail sales. Nationally, sales were down 28% during that same time period.
Slashed prices and fiscal incentives, including the recently signed $789 billion federal economic stimulus package that includes tax breaks for people buying RVs, are combining to create one of the best buyer’s markets in decades, RV dealers say.
Jacque, who’s been in the business for 30 years, said this recession is the worst hit he’s seen the industry take. However, with sales and traffic on the rise, hope and optimism are starting to creep back in. He expects business to get better in the following months and possibly peak in May – something Mike Nohr, director of the 21st Annual Manufacturers’ RV and Boat Show, is banking on.
Nohr originally had his Pleasanton-based show planned for early January but changed the dates to the last two weeks in May in the hopes of catching an upsurge in business.
“It’s an oxymoron in a way,” Nohr said. “The industry is hurting, yet we’re hearing more and more of our vendors saying people are interested in getting into an RV because they realize this is the time to get a deal.”