Regular updates on issues important to the Auto Dealer industry
In August 2022, we wrote a blog about the Powersports dealer segment of the auto industry, comparing and contrasting it to the franchised dealers that we spend most of our time writing about. This week, we highlight another segment of the auto dealer market: independent dealers. Read more about how independent dealers have specific nuances and factors that cause a greater impact to their success and profitability.
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. This week’s post presents a broad overview of the income approach, one of the three approaches considered in all business valuations. This analysis is incredibly important for auto dealerships to understand due to the expected future cash flows of most dealerships being the primary driver of value.
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.
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.
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.
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.
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.
“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.
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.
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.
