Auto Dealer Valuation Insights

April 19, 2024 Electric Vehicles Litigation Special Topics Valuation Issues

2024 NADC Conference Key Takeaways

We’re back from the National Association of Dealer Counsel (“NADC”) annual member conference in Napa, California. The conference took place from Sunday, April 14th, to Tuesday, April 16th, and conference attendees included attorneys, auto dealer principals, in-house counsel, and vendors/service providers like us. It was great to see familiar faces, meet new people, and hear how several auto groups are faring in the current environment.

In this post, we provide a brief list of key takeaways from a few of the sessions we attended. We believe the topics covered are especially important for auto dealer counsel and their clients to watch throughout the remainder of the year and beyond.

April 12, 2024 SAAR

March 2024 SAAR

The March 2024 SAAR was 15.5 million units, a 1.3% decrease from last month and a 3.7% increase compared to this time last year. The year-over-year sales improvement, declining transaction prices, and generally flat inventory levels may indicate that the industry is reverting to pre-pandemic normals. Check out this week’s post for more detail and for the outlook for April.

April 5, 2024 Public Auto Dealers Special Topics Valuation Issues

Just Released: Year-End 2023 Auto Dealer Industry Newsletter

The year-end 2023 issue of “Value Focus: Auto Dealer Industry Newsletter” is now available. For year-end industry metrics and other helpful industry insights, download the newsletter.

March 29, 2024 Blue Sky Mergers, Acquisitions, & Divestitures Public Auto Dealers

Public Auto Dealer Profiles: Group 1 Automotive

The automotive dealership industry remains highly fragmented, with publicly traded auto dealers owning only a small fraction of the total number of dealerships in the U.S. The business models of privately held and publicly traded auto dealers differ significantly, with the latter benefiting from greater scale, diversification, and access to capital. Group 1 Automotive, a key player in this sector, has demonstrated resilience in its operations and financial performance, while also pursuing strategic initiatives such as the development of its online platform, AcceleRide, and a careful approach to acquisitions and capital allocation.

March 27, 2024 Special Topics Supply Chain

News Update: How the Collapse of the Baltimore Bridge Might Impact the Auto Supply Chain

The recent collision of the cargo ship Dali with the Francis Scott Key Bridge in the Port of Baltimore has far-reaching implications for the global supply chain, particularly for the automotive industry, as the port is a major hub for automotive shipments. Automobile imports account for nearly 75% of all automobiles passing through the Port of Baltimore. The incident may cause delays in vehicle deliveries with notable effects on foreign manufacturers like Mazda and Mercedes-Benz. Although it’s too early to quantify the full economic impact, the event underscores the importance of adaptability in the auto industry, reminiscent of the resilience demonstrated during the COVID-19 pandemic.

March 22, 2024 Special Topics

It’s Not About the Mangos: Focus on People

What We've Been Reading

“It’s Not About the Mangos” by Kent Coleman offers valuable insights for business owners in the auto dealership industry, emphasizing the importance of focusing on people and relationships for organizational success. The book highlights the significance of building a positive culture, recognizing and valuing employees, and understanding that every organization is essentially a sales organization. Implementing the principles shared in this book can lead to a more successful, sales-driven dealership, as happy and motivated employees can become the most effective advocates for your business. For more insights, check out this week’s post.

March 13, 2024 Public Auto Dealers

Q4 2023 Earnings Calls

New Vehicle Resilience, Lightly Used Inventory Scarcity, and Disappointing EV Sales

The auto retail industry is experiencing a resilient market for new vehicles, with improved inventory and greater sales volumes, despite declining per-unit profitability. However, the used vehicle and electric vehicle market face challenges. We analyze the trends and potential future challenges from the top 6 public auto dealers’ earnings calls in this week’s post.

March 8, 2024 SAAR

February 2024 SAAR

The automotive industry is showing signs of recovery with a 6.0% increase in SAAR and the highest February sales since 2020, indicating a return to pre-pandemic levels. Inventory levels are rising, leading to increased incentive spending by manufacturers as they compete for buyers, while average transaction prices are declining due to these incentives and increased availability of lower-priced vehicles. Despite these trends, consumers are on track to continue spending on new vehicles over the next several months, highlighting the balance between affordability and preference in the market.

March 1, 2024 Special Topics Valuation Issues

An Estate Planning Primer

Why Auto Dealers Need to Start Thinking About Estate Planning Again

As the auto industry navigates the aftermath of record performance and faces a looming estate tax exemption cliff at the end of 2025, auto dealers are encouraged to revisit their estate planning strategies. The Tax Cuts and Jobs Act significantly raised the estate tax exemption limit, but with some of its provisions set to expire, many dealers who previously didn’t need to worry about estate planning may now be affected. Given the current political climate and the uncertainty surrounding future legislation, it’s advisable for auto dealers to act sooner rather than later to avoid missed opportunities and ensure the legacy of their family-owned dealerships.

February 23, 2024 Special Topics

No Soup for You

Lessons from Seinfeld on Customer Lifetime Value and Brand Loyalty in the Auto Industry

Drawing inspiration from classic “Seinfeld” episodes, we explore the nuanced challenges of customer loyalty and retention faced by auto dealers and OEMs, using the memorable characters of the Soup Nazi and Joe’s fruit stand as metaphors for the high stakes of customer service in the automotive industry. We explain the technicalities of calculating customer lifetime value (CLV) and the cost of customer acquisition (CAC), offering practical strategies for auto dealerships to enhance customer retention and maximize net CLV. Emphasizing the importance of personalized and unified shopping experiences, quality customer service, and the critical role of maintaining customer loyalty throughout the lifecycle of vehicle ownership, we underscore the potential pitfalls and rewards in the pursuit of brand loyalty.