Regular updates on issues important to the Auto Dealer industry
As our dealer clients know, automotive retailing competition has intensified with large, well-capitalized online-only retailers getting plenty of attention. Due to imbalances between supply and demand, gross margins on both new and used vehicles have increased in 2021.
In this post, we survey gross margins for the publicly traded dealerships, in light of the current operating environment and reconsider the investment thesis put forth by the new entrants.
The July 2021 SAAR was 14.8 million units, roughly flat compared to July 2020, but down 12% from July 2019. SAAR was expected to fall for the third straight month, but this figure is lower than many experts predicted in June. In this week’s post, we dig into the numbers.
As we enter into the second half of 2021, first half statistics are being released and second quarter earnings calls are on the horizon for the public auto companies. We’ve all read the headlines of the auto dealer industry in 2021: heightened profitability, historic gross profits per unit and soaring retail sales prices for new and used vehicles, and inventory shortages and challenges caused by plant shutdowns and the microchip shortage. What are some of the key industry statistics saying about the current and future health of the auto dealer industry? Have they peaked, are they continuing to increase or beginning to decline, and/or how long will the current conditions hold? In this post we attempt to answer these questions.
A formula clause explains how a business will be valued, usually as part of a buy-sell agreement, employment agreement, transfer of interests under certain circumstances, or other agreement entered between owners of a company. In this post, we explain formula clauses, when they are used, why they are used, and why we ultimately recommend they not be used.
The June 2021 SAAR totaled 15.4 million units, which is up 12.4% compared to June 2020 (the lowest June figure in recent memory due to the COVID-19 pandemic) but down 9.9% from May 2021. In this post, we discuss the June SAAR number, the ongoing microchip shortage, the hot market for used cars, and what all this means to dealers.
When you think “electric vehicles”, there has been one brand that has established itself as a clear leader: Tesla. In this post, we take a look at Tesla and recent competitors that are challenging Tesla in the EV space.
We recently attended the annual conventions of two state automotive groups – Kentucky and the Tri-State Convention consisting of Tennessee, Alabama, and Mississippi. In this post, we summarize certain sessions that our readers should find interesting including cybersecurity issues, how to protect your dealership from fraud, future trends and their possible impact, coming regulation and what that means for your dealership, and the importance of succession planning.
In this whitepaper, we break down the value drivers of a dealership, discuss when you might need a formal valuation, introduce the valuation methodologies used by professional business appraisers, and go into some depth about topics such as dealer financial statements and normalizing adjustments to the balance sheet and income statement.
After three straight months of impressive gains, the SAAR fell 9.6% in May from 18.8 million units to 17.0 million units. The summer is typically a strong season for auto sales, but several supply-side factors have limited the availability of vehicles over the last month.
In business valuation, appraisers seek to normalize historical earnings to establish the level of earnings an investor might reasonably expect from an investment in the subject company. These adjustments may increase or decrease earnings, and they can be for a variety of reasons. Normalization adjustments include surveying various expense categories and determining whether the amount historically paid is considered “market rate.”
Rent paid to a related party is frequently judged to be above or below market, which can be for a variety of reasons. Dealers’ priorities lie more with sales and operating efficiency than tracking what the market says they should pay in rent. The rent paid also may be artificially high or low for tax purposes. In this post, we examine what exactly this means, and why auto dealers may hold real estate in a separate but related entity from the one that owns the dealership operations.
