Archived: Commerce Helps Car Dealership Through Tough Economy


Customers come in when they come in, says car dealership owner Ray Malhotra.

And in these “tough times,” he says, only a handful of prospective buyers drop by their Hyundai showroom each day. The ones who do come in run the risk of being turned away.

Sometimes it’s because apprehensive credit companies reject more of their potential customers, and sometimes it’s because their dealership just doesn’t have the inventory of cars currently in demand during the high gas price economy.

Fuel-efficient economy-class cars – like their Accents and Elantras – should be their saving grace at a time when many car dealerships are facing hard times, but the factories simply don’t have enough of them in stock.

“We wait patiently for them,” Malhotra says, but the only thing their dealership can do is try to order more without much success.

The factories have stopped making this year’s model and are gearing up for production of next year’s line of cars, he says. They need to survive until early October, which is when he is expecting a fresh shipment of new cars, which isn’t easy with business being so slow going in.

So it’s a good thing they have the City of Commerce as their landlord. Mayor Tina Baca Del Rio recently said at a council meeting that investing in the dealership makes good business sense.

The dealership gets the support of the city, and in return the city gets to develop its property, as well as cultivate another major source for sales tax revenue – just as long as the dealership can make it through its “growing pains.”

Businesses that receive support from the city often also feel an obligation to give back to the community, which is something Councilman Joe Aguilar says Commerce Hyundai has done. They provided one of their cars to the city’s volunteer public safety group ComCats, he says.

“They didn’t donate the car but they’re paying for the lease of the car, so they’re showing community support,” he says.

City officials also say that the dealership, which opened its showroom in July 2007, has made an effort to develop the property on Telegraph Road into a more attractive location.

“It’s an improvement to an under-utilized portion of the city,” Commerce spokesperson Brian Wolfson says, referring to the northwest end of the Telegraph corridor where the so-called “Mix-master” brings in traffic from several streets including Eastern Avenue and Atlantic Boulevard.

Two previous auto-related businesses – a Ford dealership and a Hertz car rental office – have both failed on the property, even though according to Wolfson it’s a “fantastic location” with visibility from the 710 freeway and the intersection.

The city has worked closely with the dealership, ever since owners Ray and his brother Bob Malhotra approached the city back in late 2003. In addition to personal financing by the Malhotras, the dealership has benefited from the city’s financial assistance during the construction of the showroom and service facility.

And even though the city approved a lease with the Malhotras in September 2004, they waited until the dealership officially opened before charging them rent, in order to offset the money that the Malhotras themselves put into developing the showroom and vehicle service building, according to a city staff report.

The city’s Community Development Commission – made up of the same people who sit on the council – has so far provided a total of $899,000 in assistance to the dealership, according to Community Development Coordinator Heriberto Valdes.

He says the city considers this investment already recovered because the city owns the property and benefits from all the improvements made on it.

The city has also scheduled $80,000 in annual allowance to the dealership for the first five years to cover advertising and marketing campaigns. The assistance is provided based on performance, so the dealership must meet a sales goal each month.

These arrangements were laid out in a contract agreement between tenant and landlord, but this past April the dealership owners wrote a letter to the city requesting financial relief to help them through the slowing economy. The owners had no more personal funds to fall back on.

After some negotiation between staff and the Malhotras, recommended contract changes went to the city council.

Could the dealership get a six-month advance on its $80,000 allowance, originally scheduled for March 2009, as well as a reduction of their monthly rent of $10,000 to $9,000? And could the required sales goal be reduced from 60 car sales a month to 33 car sales a month for the next six months?

The council answered that it was not a problem to grant the relief. They voted on Aug. 4 to restructure the city’s agreement with the Commerce Hyundai dealership accordingly.

The tough times are what Ray Malhotra talks about when he explains why he requested financial relief from the city. It’s so tough that three cars were recently stolen off their lot in broad daylight, he says.

The media’s fixation on high gas prices grates on him. He wishes there were some perspective – the recent high prices are still much less than in other parts of the world, he says. The media has done more harm than good, he says.

But he emphasizes that things are going to get better.

“We have to find a solution, not dwell on the problem,” he says about pessimism over the economy.

As it stands, when a customer comes in specifying that they need to buy the hard to find Accent model, the dealership’s sales staff have to turn them away.

“If you get your hands on an Accent, run away with it!” Sales Manager Ty Elkin tells a recent customer.

This display of magnanimity – he may be losing a customer in the process – is reflected in the fact that they were ranked number one in customer service among the Hyundai dealerships, according to a manufacturer-sponsored customer survey.

It also reflects a confidence and optimism that might have something to do with the city’s overall plans to develop the surrounding area into a retail and entertainment corridor. There are even plans to bring in another car dealership to the southeast end of Telegraph Road, which Malhotra feels is one more step in shaping the identity of Commerce as a place to shop for cars.

Councilman Robert Fierro says the city will see major development on the Telegraph Corridor in the next few years. “When this big urban entertainment center comes in, everyone will benefit…,” he says. In the mean time, “we’re hoping [Commerce Hyundai] survives the crunch of these economic times.”

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