Auto Dealer Valuation Insights

A weekly update on issues important to the Auto Dealer industry

SAAR

September 2023 SAAR

The automotive industry has witnessed its fourteenth consecutive month of annual improvements in the Seasonally Adjusted Annual Rate (SAAR), with September 2023 recording a SAAR of 15.7 million units—a 14.9% increase compared to the previous year. However, we anticipate a potential end to the double-digit year-over-year improvements streak in the coming month. With challenges like the United Auto Workers strike and changing supply chain conditions, it remains critical to monitor consumer activity and sales trends, especially given the decline in transaction prices and surge in incentives.

Blue Sky Special Topics

The Winding Road to Blue Sky Value

Important Considerations in Auto Dealer Valuations and Pitfalls to Avoid

In the upcoming month, Scott Womack and David Harkins will present at three different forums, shedding light on the pivotal aspects and considerations of auto dealer valuations, including special considerations in litigation/buy-sell matters. They will delve into why traditional market approaches are generally not applicable for the valuation of auto dealerships, especially single rooftop operations, and explore the limitations of existing database evaluations. Beyond this, they will also explore the changing dynamics of value drivers like real estate and employee management, highlighting the shifting landscape as the industry moves towards digital and online platforms, and offer insights and suggestions for navigating buy/sell litigation and ensuring fair and consistent transactions.

Valuation Issues

Do You Know How Much Your Dealership Is Worth?

Whitepaper: Understand the Value of Your Auto Dealership

If you’ve never had your auto dealership valued, chances are that one day you will. The circumstances giving rise to this valuation might be voluntary (such as a planned buyout of a retiring partner) or involuntary (such as a death, divorce, or partner dispute). When events like these occur, the topic of your auto dealership’s valuation can quickly shift from an afterthought to something of great consequence.

SAAR

August 2023 SAAR

The automotive industry in August 2023 saw a 13.6% year-over-year growth in SAAR (Seasonally Adjusted Annual Rate), marking the thirteenth consecutive month of such improvements. However, this growth is gradually tapering off, suggesting that the industry’s recovery is becoming more nuanced.

Public Auto Dealers Supply Chain Used Vehicles

Q2 2023 Earnings Calls

Lower New Vehicle Supply Boost Fails to Lift Profits; Used Vehicle Prices Drop Amid High Demand

The automotive market is experiencing a shift as improved new vehicle availability is affecting used vehicle prices and profitability. Insights from industry leaders like Lithia, AutoNation, and Asbury indicate important trends, from stock incentives for General Managers to the implications of electric vehicle maintenance on dealerships. This piece explores these dynamics, touching on the potential for pent-up demand and the future of dealership sizing in a post-COVID landscape.

Valuation Issues

Driving Value: Key Components of an Auto Dealership Valuation

The value of an auto dealership is shaped by several factors, similar to how certain components make sports games iconic over time. Some of these value drivers, such as franchise affiliation and real estate conditions, can be influenced by the dealer, while others, like economic performance and location, are largely external. Just as sports fans revel in the nostalgic moments of iconic games, auto dealers can enhance their dealership’s value by understanding these drivers, focusing on what’s within their control, and adapting to external market conditions.

SAAR

July 2023 SAAR

The July 2023 SAAR shows a consistent year-over-year growth in auto sales volumes for the twelfth consecutive month, reflecting the industry’s journey of recovery since mid-2022. While sales projections remain positive through 2023, the volatility of the auto industry over the last three years and potential economic factors warrant vigilance for the future.

Electric Vehicles Special Topics

Toyota’s Steady State Battery

Breakthrough or Yet Another Long-Dated Production Target?

In early July, Financial Times reported Toyota’s solid-state battery breakthrough. According to Keiji Kaita, president of Toyota’s research and development center for carbon neutrality, the goal is to cut the size, weight, and cost of both liquid and solid-state batteries in half. In this post, we get into the details of this report, what auto dealers should know about solid-state batteries, and provide some context for realistic expectations.

Special Topics

Mid-Year 2023 Review of the Auto Dealer Industry by Metrics

Cooling Statistics, But Perspective Is Key

The first half of 2023 has been successful for auto dealers despite a decline in some metrics from previous record highs, according to recent industry reports. Although new vehicle profitability has experienced a reduction compared to the end of 2021, it’s still notably higher than pre-pandemic levels. In this blog, we provide a deep dive into key indicators such as new vehicle supply, average trade-in equity values of used vehicles, and vehicle miles traveled to give a comprehensive view of the current auto industry trends.

Auto Dealerships

Mercer Capital provides business valuation and financial advisory services to companies throughout the nation in the auto dealer industry.