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.
Executives Anticipate a Return to Normal
In 2022, fewer than 14 million light vehicles were sold, which was the lowest level since 2011. Supply constraints hampered productions from automakers, which led to higher profits for auto dealers on each vehicle they were able to acquire and sell, both new and used. Vehicle production improved gradually throughout the year, which is anticipated to continue through 2023.
This week we review the Q4 2022 earnings calls from the executives of six publicly traded auto dealers and discuss some of the major themes.
Has Profitability Peaked?
As we turn the calendar to March, 2022 is in the rearview mirror, and year-end statistics for the auto industry have been released. How did the industry perform, and what do the metrics tell us about the direction of the industry in 2023? In this post, we discuss the key metrics we track for the industry: new vehicle profitability, the supply of new vehicles, average trade-in equity values of used vehicles, the used-to-new vehicle retail unit sales ratio, fleet sales, and vehicle miles traveled.
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.
How the Pandemic Darling May Have Flown Too Close to the Sun
Lately, Carvana has been in the news for all the wrong reasons. Its share price is down over 90% since its pandemic peak and currently sits below the low levels of March 2020. This post provides an abbreviated history of Carvana from its founding in 2012 to 2022 and discusses what its successes and struggles mean for traditional auto dealerships.
Large Dealer Groups Continue to Invest in the Franchise Dealer Model, Managing Their Dealerships as Portfolios
It’s earnings call season again. Themes from the Q1 2022 earnings calls were affordability issues, managing stores as a portfolio, the health of the franchise dealer model, and who repairs electric vehicle components and what that means for dealerships. All this against a backdrop of the continued inventory shortage makes for an interesting post. Read more here.
Inventory Shortages Continue to Dominate the Auto Dealership Operating Environment
Inventory shortages are at the forefront of many of Q4’s earnings calls themes. While dealers across the country are looking to increase their new vehicle inventories, used vehicles are in greater supply. Numerous executives noted they are carefully managing this used inventory to avoid getting burned on currently elevated prices. In addition to inventory shortages, we also highlight comments concerning dealers charging above MSRP and the effect that has on the market.
What Does This Mean for Dealers and Consumers?
2021 was an interesting year for auto dealers. In this post we discuss what things will look like when we return to a more “normal” operating environment. Specifically, what negative equity from used car buyers in 2021 may mean for dealerships.