Regular updates on issues important to the Auto Dealer industry
Auto retailer executives had a lot to say during the Q2 2024 earnings calls. The four main topics discussed on the calls include the effects of the CDK cyberattack, inventory management, consumer affordability, and the consumer shift to hybrid vehicles. We unpack these trends in this week’s post.
The July 2024 SAAR came in at 15.8 million units, a 4.2% increase from last month and roughly flat with July 2023 (-0.8%). While the month-over-month increase was expected based on the CDK cyber-attack that hit the auto dealer industry in late June, we find it notable that results were still below last year. Mercer Capital expects the August 2024 SAAR to land within the 15.5 to 16 million range as a portion of the Labor Day holiday weekend falls in August this year. Throughout the remainder of 2024, we expect to see pressure on the average transaction price and per-unit dealer profit as expanding inventory levels drive incentive spending higher.
This post discusses important concepts of personal goodwill in divorce litigation engagements. The discussion relates directly to several divorce litigation cases involving owners of automobile dealerships. These real-life examples display the depth of analysis that is critical to identifying the presence of personal goodwill and then estimating or allocating the associated value with the personal goodwill. The issues discussed here pertain specifically to considerations utilized in auto dealer valuations, but the overall concepts can be applied to most service-based industries.
The June 2024 SAAR came in at 15.3 million, a 4.0% drop from last month and a 4.8% drop from June 2023. According to Wards Intelligence, the CDK cyberattack caused a 50,000-unit deficit during June 2024; however, second-quarter sales were still relatively flat (-0.4%) from the second quarter of 2023 as only 11 of 91 days were impacted in the quarter. We believe it is reasonable to expect many of the lost sales from June 2024 will be pushed into July 2024, especially with the long 4th of July weekend coinciding with when many dealers came back online; the outage stretching into this long weekend may have had significantly greater impacts. As we move into the second half of 2024, we expect to see pressure on average transaction price and per-unit dealer profit as expanding inventory levels drive incentive spending higher.
In an increasingly digital world, we’ve noted an increase in service providers catering to cybersecurity in a variety of ways. While no dealer gets excited about spending thousands of dollars to mitigate risks rather than grow profits, the CDK Global cyberattack may be a watershed moment for the industry.
Explore the shifting landscape of auto finance as we compare the roles of captive finance companies and third-party lenders, track current market trends, and analyze credit quality and interest rates. From assessing the changing face of dealership profitability to exploring the increasing importance of finance and insurance departments, we offer our perspective on the industry’s development and changes in 2024 and potential future.
The May 2024 SAAR was just shy of the 16 million mark, coming in at 15.9 million units, generally flat from last month (+0.8%) and reflecting year-over-year growth of 2.5%. Throughout the pandemic years, the auto industry was defined by volatility and uncertainty as inventory levels plummeted and transaction prices skyrocketed. In the first half of 2024, however, we have seen more stability in the SAAR as inventory levels rise and transaction prices moderate. As we move into the second half of 2024, we expect to see pressure on average transaction price and per-unit dealer profit as expanding inventory levels drive incentive spending higher.
We’ve all been on an airline flight nearing the destination when the captain comes on the intercom and informs us that we are about to start our final descent, finish our beverages, and return our tray tables to the upright and locked position. Instinctively, we know this announcement signals that we have been cleared for landing and will be landing soon. As I reviewed the key automotive statistics this week in preparation for writing this blog, I couldn’t help but think, has the auto industry been cleared for landing after a three-year flight filled with periods of turbulence and smooth air? In this post, we discuss several key metrics we have tracked over the last several years: new vehicle profitability, the supply of new vehicles, average trade-in equity values of used vehicles, fleet sales, and vehicle miles traveled.
A thoughtful business valuation of an auto dealership will likely rely on multiple approaches to derive an indication of value. While each approach should be considered, the approach(es) ultimately relied upon will depend on the unique facts and circumstances of the dealership and its operating conditions. We recently focused on the asset approach and the income approach for valuing auto dealerships. This post presents a broad overview of the market approach, the last of the three approaches considered in all business valuations.
For the past few years, electric vehicles (EVs) have been a huge talking point. While there has been plenty of consumer interest in EVs, there has been even more skepticism centered largely around range anxiety and upfront cost. If internal combustion engine (ICE) vehicles are porridge that is too cold, and EVs are perhaps too hot, hybrids, at least for now, appear to be “just right.” This post touches on recent developments with electric vehicles and how they are leading to a surge in demand for hybrids.
