In part 2 of our series on floorplan interest, we take a closer look at floorplan relevant factors and macroeconomic forces to keep an eye on throughout the coming year and beyond as dealers plan their floorplan expenditures and budgeting.
In part 2 of our series on floorplan interest, we take a closer look at floorplan relevant factors and macroeconomic forces to keep an eye on throughout the coming year and beyond as dealers plan their floorplan expenditures and budgeting.
Compared to last year, interest rates have significantly increased since the Federal Reserve began raising rates in March 2022. Inventories have also improved as the industry works through its supply chain issues. These shifts in economic trends are expected to have an impact on many aspects of auto dealer operations. In this week’s post, we talk about floorplan interest income and pose some important questions: What is floorplan interest expense, and what are floorplan credits? How have floorplan credits turned into an unlikely profit center for dealers? Can we expect this trend to continue amid changing conditions?
January is a month to review statistics from the prior year and to make predictions for the new year. The automobile industry is no different. In this post, we tackle a potpourri of trends to monitor in 2023, including new and used vehicle prices, electric vehicles, connected cars, and SAAR predictions for 2023.
We’ve turned the page on 2022, another year defined by challenges, record profitability and elevated valuations for auto dealers. As we enter 2023, there will likely be unique challenges and opportunities for auto dealers regarding business valuations. We will dedicate future posts to the discussion of these opportunities from the perspective of succession planning in an environment with sunsetting tax exemptions and depressed asset values, especially if interest rates continue to rise and profitability subsides in 2023.
We previously discussed six events that could trigger the need for a business valuation. In this week’s post, we discuss six things that attorneys and auto dealers should consider when selecting or working with a business appraiser.
The December SAAR was 13.3 million units, down 5.3% from last month but up 4.7% from this time last year. This month’s SAAR data is a bit concerning for the auto industry, as supply chain improvements do not seem to be translating to improvements in the sales pace of vehicles as quickly as the last couple months have indicated. Over the past month, it has seemed more and more likely that plummeting trade-in equity, persistently high interest rates and growing fears of an economic recession are keeping the sale of automobiles low, which could spell trouble for auto dealers that have thrived in a high price environment over the past eighteen months.
It has become a tradition for the Auto Dealer team at Mercer Capital to end the blog year with a “unique” summary of industry events, riffing off Clement Clark Moore’s classic “A Visit from St. Nicholas.” We hope all of you enjoy the holiday season. We look forward to hearing from you in 2023.
The November 2022 SAAR was 14.1 million units, down 6.5% from last month but up 7.9% from November 2021. Compared to this time last year, vehicle availability has significantly improved, and there seems to be hope around the industry that the auto inventory crunch is in its final act. If true, this would be good news for auto dealers and consumers alike, as more units on dealer lots seem to be the first step in a “return to normal” for the industry. While it’s clear that a year-over-year improvement is present, a dip from last month’s SAAR figure may raise red flags for some of our readers. However, an additional selling weekend in October and a marginal uptick in sales due to natural disasters in the Gulf of Mexico were both tailwinds that supported a surprising improvement in the SAAR last month. Given this perspective, November 2022’s SAAR seems to return to the larger trend of improving conditions.
Despite existing operational headwinds and new economic headwinds in 2022, auto dealers continued to produce record profits. As we wind down the year and look towards next year, we look back to see what was popular with you—our loyal readers. Here are some of your favorite posts from 2022.
This week we compare the FIFA rankings of the world’s largest vehicle producing countries. Spoiler alert: there is no correlation. But in our research, we found plenty of interesting nuggets and talking points. We also discuss top vehicle producing nations that did not qualify for the World Cup, nations that did qualify but do not have a large presence in auto production. We also get into brand presence and Blue Sky multiples of these nations’ vehicle brands.
In each “Meet the Team” segment, we highlight a different professional on our Auto Dealer Industry team. This week we highlight Harrison Holt, Financial Analyst. We hope you enjoy getting to know us a bit better.
The October 2022 SAAR was 14.9 million units, up 12.7% from October 2021 and up 9.8% from last month. This month’s SAAR comes as a bit of a surprise, as the last three months’ sales pace settled at around 13.4 million units and seemed to have stabilized at a short-term equilibrium. However, meaningful improvements in inventory balances and other tailwinds like natural disaster-related demand contributed to the second-highest monthly SAAR total this year. For perspective, from 2014-2019, there were zero months where SAAR was below this recent high in the inventory-constrained 2022.
A few weeks ago, I sat down with Kevin Nill of Haig Partners to discuss the current state of the M&A market and other timely trends in the auto dealer industry. Specifically, we discussed some of the movements in Blue Sky multiples for various franchises and interpret the range of multiples that Haig Partners recently published with the release of their Second Quarter 2022 Haig Report.
We are pleased to release our latest edition of Value Focus: Auto Dealer Industry Newsletter. The newsletter features a commentary on industry data from mid-year 2022. Additionally, this issue includes two timely articles: “2022: How Is the Auto Industry Doing and What Does the Future Hold?” and “Earnings Calls: Executive Summary.”
NADA estimates that auto dealerships could face up-front costs of up to $294,000 per rooftop to comply with the FTC’s Safeguards Rule. If you are not familiar with the Safeguards Rule, this post discusses it and the amendments that must be complied with by early December 2022.
The September SAAR was 13.5 million units, up 2.3% from last month and up 9.6% from September 2021 when the industry had less than one million vehicles available for sale. While this month’s SAAR highlights a year-over-year improvement and gives us context around how low inventory managed to fall in 2021, this month’s data release does not indicate a “return to normal” by any means.
In this week’s blog, we continue our review of the book The Future of Automotive Retail by Steve Greenfield. It covers the changing trends of consumer behavior and technology that will likely continue to shape the automotive retailing experience for decades to come. In part one of the series, we discussed the “convenience economy,” including predictions of changes to power sources and vehicle production.
In Part two of this series we discuss vehicle ownership, autonomous vehicles, connected cars, service and repairs, and the proposed future of the auto dealership.
Over the next two blogs, we will review the book The Future of Automotive Retail by Steve Greenfield. This book discusses changes in trends of consumer behavior and technology that will likely continue to shape the auto dealer retailing experience for decades to come. In part one of this Blog series, we review the discussions and predictions caused by the “convenience economy,” including changes to power sources and vehicle production.
Interest rates are up, gas prices are volatile, inflation is rampant and vehicle affordability, GDP, and the stock market are down. How have auto dealers belied all of these negative headwinds to produce strong earnings? The simple answer is that dealers have been able to pass on price increases to consumers and have benefitted from more lean cost structures in the wake of the pandemic when they had to cut all costs possible to the bone. In this week’s blog, we consider these trends and analyze Blue Sky values and multiples over the past few years thanks to info provided by Haig Partners.
The August SAAR was 13.2 million units, down 1.1% from last month but up 0.7% from August 2021. This month’s data release, marks the third month in a row that the SAAR has been in the low 13 million-unit range, with the metric seemingly having stabilized in the short term. To illustrate this trend, over the last four months the average SAAR has been 13.1 million units.
Now that the August data has been released, we have much more visibility to what the full year SAAR might look like.
In this post, we focus on the impact of Uber and Lyft on the auto industry as a whole, particularly as compared to initial concerns. We address the questions: “How has the rise of rideshare giants affected the auto industry?”, “How did the COVID-19 pandemic affect ridesharing?” and “What can we expect from the rideshare industry going forward?”
Auto dealers have experienced heightened profitability over the last two years. For dealers with excess cash from continued profits or remaining PPP funds, have you thought about the powersports industry? As one auto dealer client recently recounted to us, “if you have the skills and experience in selling high volumes of automobiles to consumers, then you have the necessary skills to also succeed in the powersports industry.” In this post, we explain what the powersports industry is and how big it is, as well as highlight similarities and differences to the traditional auto dealer industry for those interested in possibly entering this industry.
Supply issues continue to dominate the industry with no end in sight. This week we discuss supply issues along with three other themes that were discussed during the Q2 earnings calls.
The July 2022 SAAR was 13.3 million units, an improvement from last month’s 13.0 million units but down 10.2% from July 2021’s rate of 14.7 million units. The SAAR continues to reflect depressed sales rates as supply chain shortages restrict volumes across the United States. This week we briefly discuss the July 2022 SAAR but focus primarily on the passing of the CHIPS-Plus bill and how it might affect auto dealers.
The first half of 2022 is behind us, and with school about to start, report cards will be here before we know it. In that same light, the auto industry has published its statistics for the first six months. This post reviews predictions by industry analysts (and us) made at the beginning of the year by analyzing several key metrics. Additionally, we discuss threats that arose during the first half of 2022 and their impact on the auto industry for the remainder of the year and perhaps longer. Finally, we offer a few predictions for the second half of 2022.
