Here is what auto retailer executives had to say during the Q4 2024 earnings calls. The major themes from the earnings calls are outlined and discussed below:

Theme 1: New Vehicle Market — Volume Growth and GPU Normalization

Publicly traded auto dealers reported strong volume growth in new vehicle sales. Despite some year-over-year declines in gross profit per unit, sequential stabilization was also a common theme. Ongoing inventory management, particularly new vehicles, has been a recurring theme with continued pressure on OEMs to align production and inventory with market demand, while dealerships focus on inventory optimization, supplier relationships, and balancing supply across vehicle segments.

“Our stores are well positioned to capitalize on a return to historical SAAR levels and we saw significant growth in new unit sales in the fourth quarter. We are now seeing total vehicle GPU stabilize near our long-term expectations. […] Total unit sales increased 1.7% year over year, while total gross vehicle profit of $4,535 was consistent with the prior sequential quarter and was down $444 compared to the same period last year. New vehicle units increased 7.4% year over year, with particular strength in import manufacturers.”
– Bryan DeBoer, Lithia Motors, President and CEO

“Looking at our retail auto business, we delivered 120,530 units during the quarter, up nearly 3%. Our same-store units were flat. New units delivered increased 11%. Average new vehicle transaction price increased 5% to $60,288. Gross profit per new vehicle retailed remained strong at $5,146 and increased sequentially by $74 from the third quarter of 2024 and remain nearly $2,000 higher [than] in 2019.”
– Roger Penske, Penske Automotive Group, Chairman and CEO

“New vehicle units sold [were] up 14% on a reported basis and over 8% from same-store. This reflects the resiliency of demand and our operational effectiveness as well as the value received from driving volume from our new dealership acquisitions. While new vehicle GPUs moderated from the prior year, we are pleased with the sequential quarter performance, increasing $55 on a reported basis.”
– Daniel McHenry, Group 1 Automotive, Senior Vice President and CFO

“The key highlight of the quarter was the delivery of 12% same-store new unit volume growth. New vehicle sales is the front end of our profit cycle, and volume growth in this area bodes well for the future of our After-Sales and Financial Services business.
– Micheal Manley, AutoNation, Director and CEO

“You look at our day supply, we’re on a 49 day supply in new. Within that, we have some brands that have a 7 day supply and some that have almost a 90 day supply. […] Everyone’s focused on 2019 numbers and kind of comparing off of that. I’ve stated it before, I’ll state it again, Asbury is a different company today than in 2019. Our model mix is different. Our brand mix is different, and we’re in different markets.”
– David Hult, Asbury Automotive, President and CEO

“On the balance sheet, our 39 days’ supply of new vehicle inventory at year end was down 25%, or 13 days, from the third quarter. The new vehicle inventory ended the year below 43,000 units, which was up from 35,000 units a year ago, but down from the 46,000 units at the end of September. The strong new vehicle sales contributed in part to these reductions, but also our operating teams have been more selective in the OEM allocation process.”
– Thomas Szlosek, AutoNation, Executive Vice President and CFO

“[The OEMs] need to do a much better job of managing their day supply across the board. Now, day supplies came down in the fourth quarter because volumes went way up. Let’s see what happens in the first two quarters of this year, in particular against the domestics.”
– Jeff Dyke, Sonic Automotive, President

“New and used inventory remains in good shape. New vehicle inventory is at a 49 days’ supply, which includes 41 days in the US and 65 days in the UK. Day supply of new vehicles for premium was 52.”
– Michelle Hulgrave, Penske Automotive Group, Executive Vice President and CFO

Theme 2: Parts and Service — Technician Expansion and Strong Profitability

To finish out 2024, parts and service departments across the country were performing at a high level. Most of the public dealers reported record high gross profits and strong year-over-year growth. Sonic Automotive saw a 12% increase in same-store fixed operations gross profit, driven by higher warranty repairs and a focus on technician hiring. Group 1 Automotive saw a 6.5% increase in repair orders, driven by higher-margin warranty and customer pay work, and their focus on technician headcount growth over the past few years. Overall, the theme is that aftermarket services, technician growth, and improved operational efficiencies are driving profitability in the parts and service departments.

“Our parts and service or fixed operations business remains very strong, with a 12% increase in same-store fixed operations gross profit in the fourth quarter. This strong growth was driven in part by higher levels of warranty repairs combined with the effects of our initiative to increase technician head count by 300 net technicians during 2024. We are very excited to announce that we exceeded this challenging goal, adding 335 net technicians during 2024, which we expect to set the stage for strong fixed operations growth in 2025 as we continue to focus on technician hiring and retention.”
– David Smith, Sonic Automotive, Chairman and CEO

“After sales performance will be a key driver of growth in 2025. In the quarter, after sales revenues were up 3.4% compared to the prior year, delivering a 55.8% gross profit margin. Warranty work was up this quarter with a 19.9% increase in gross profit year over year. Our ability to manage technician head count and drive operational efficiencies has positioned us well to meet ongoing demand.”
– Adam Chamberlain, Lithia Motors, Executive Vice President and COO

“For the fourth quarter, our margin rate was 48.4%, up 110 basis points from a year ago, reflecting improved parts and labor rates, higher tech efficiency, leverage, and higher value repair work. We continue to develop and promote our technician workforce, which has led year-to-date increases in our master and certified technician head count. And our overall technician head count increased nearly 2% on a same-store basis. So, looking ahead, we expect After-Sales business will grow roughly mid-single digits each year.”
– Thomas Szlosek, AutoNation, Executive Vice President and CFO

“One half of our gross profit is derived from our service and parts business. As we look to continue growing this important part of our business, we’ve increased our technician count by 7% during 2024 and our effective labor rate in the US has increased 6%. In the quarter, service and parts revenue increased 13% to $771 million, including 7% on a same store basis with customer pay up 3% or warranty up 24% and collision repair up 4%.”
– Roger Penske, Penske Automotive Group, Chairman and CEO

“Aftersales fourth quarter revenues and gross profit outperformed sequentially and year-over-year. The fourth quarter saw a 6.5% increase in the number of repair orders. The only activity decline was our lower margin collision work, which was more than compensated for a higher margin, warranty and customer pay. The average same-store dollars per repair order was up over 7% in the fourth quarter. These gains demonstrate our ability to add after sales capacity on a same-store basis. Our overall same-store, non-technician US head count has declined 10% from 2019. However, our technician head count is up 18% over that same period.”
– Daniel McHenry, Group 1 Automotive, Senior Vice President and CFO

“On a same-store basis, gross profit for our fixed operations business was up 11%. And the all-important Customer Pay segment, was up 13%. Looking ahead, we remain confident in a mid-single-digit growth rate for Customer Pay is sustainable.”
– David Hult, Asbury Automotive, President and CEO

Theme 3: Policy Uncertainty in the United States Surrounding Tariffs and EVs

There was much discussion of macro issues affecting the automotive industry, particularly tariffs and EVs, after an election cycle. Lithia Motors points to their strategic advantage of maintaining higher inventory levels, potentially cushioning them from the impact of any upcoming tariffs. On the policy side, Group 1 Automotive and Asbury Automotive acknowledge the uncertainty brought about by shifts in the US administration’s stance on issues like EV subsidies and taxes. However, Group 1 emphasizes the importance of staying agile and focused on execution to thrive under any set of conditions and Asbury remains optimistic about the pro-business environment that is expected from the new administration.

While electric vehicle sales have seen volume growth, OEMs are balancing production capacities and addressing uncertainties about ongoing government incentives with the new administration. Several companies noted that while sales for EVs and hybrids have surged, they remain cautious about long-term demand. They also mention the substantial discounts applied to EVs, indicating that while sales have increased, OEMs may need to adjust pricing strategies to align with market realities.

“If we’re looking at other macro issues, I think tariffs is probably one of the larger things, you know, and I’d probably never thought I’d be sitting here saying, I’m glad I have an extra 20 days of inventory over most of the industry. […] The tariffs, for us, we have about 36% to 38% of our vehicles […] could be impacted by tariffs. And being that we’ve got a 50-plus day supply, we should be sitting quite nicely to be able to work through any negotiations that are happening between the two countries or three countries or four countries or whatever it ends up being at.”
– Bryan DeBoer, Lithia Motors, President and CEO

“There’s obviously potential for tariffs to impact your volume, to impact your margin. If I look back at 2019 and what happened during that period of time, what we saw was the tariff impact come through in wholesale prices, and ultimately through into retail prices. But after a period of time, they began to be mitigated either through actions from the manufacturers in terms of their ability to drive cost efficiency elsewhere or just to maintain volumes in the marketplace.”
– Thomas Szlosek, AutoNation, Executive Vice President and CFO

“But as we sit here today, we think we’re entering a more stable market. I mean, with the new administration, it’s a little bit more pro-business. With the shift from EVs coming back to ICE, we see these are all benefits.”
– David Hult, Asbury Automotive, President and CEO

“I think the OEMs are all over this topic, frankly. They must have had multiple, multiple meetings in terms of their product capacity and what they’re going to do to balance, because I think everybody is clear that the next four years are going to be different to their anticipation should the different outlook happen. And they are already pivoting in terms of their products, in terms of their powertrains, in terms of how they think the market will play out. So, yes, there was an element of clearing the decks and urgency around Q4 in BEVs and hybrids. But remember, we have seen hybrid – we have seen BEVs kind of settle in at 6% to 8% of the marketplace. Hybrids had a very strong year last year, as people recognized the benefits of both combustion and battery power.”
– Micheal Manley, AutoNation, Director and CEO

“By powertrain, hybrid vehicles unit sales were up approximately 50% from the fourth quarter a year ago and represented nearly 20% of our unit sales and 10% of our ending inventory. […] OEM actions with incentives and uncertainty regarding the longevity of government incentives for BEV likely contributed to stronger BEV sales from traditional OEMs during the quarter.”
– Thomas Szlosek, AutoNation, Executive Vice President and CFO

“Although we’ve done a great job working with our OEMs to manage Bev Inventory to be more closely aligned with customer demand, the majority of Bev units still require significant discounting. In Q4, the average discount on a Bev from MSRP was nearly $6,900 per unit.”
– Rich Shearing, Penske Automotive Group, COO

“And don’t forget, the manufacturers are heavily incentivized in EVs right now. So you probably have a little false positive in terms of the amount of volume that we’re doing in the country right now.”
– Jeff Dyke, Sonic Automotive, President

“Lastly, a few thoughts on the evolving US landscape. There’s a great deal of conjecture at the moment about Washington and the impact that new administration’s policies will have on retailers and OEMs. While we don’t know the outcome of the impact on changes in things like EV subsidies, taxes, tariffs or interest rates, we feel the best way to capitalize is to ensure that Group 1 stays nimble and focused on execution. We have to be ready to compete on whatever playing field exists, with whatever set of variables we’re presented.”
– Daryl Kenningham, Group 1 Automotive, President and CEO

Conclusion

At Mercer Capital, we follow the auto industry closely to stay current with marketplace trends. These give insight into the market for a private dealership, which informs our valuation engagements. To understand how the above themes may or may not impact your business, contact a professional at Mercer Capital to discuss your needs in confidence.