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AutoNation and Lithia’s race to dominate the auto dealership business

Automobile dealerships have been mother and pop companies for a lot of their existence. However the business is slowly consolidating.

Six publicly traded dealership teams — AutoNation, Lithia Motors, Group 1 Automotive, Sonic Automotive, Penske, and Asbury Automotive Group — have been on a procuring spree in recent times, shopping for up a small however rising share of dealerships. And so they’ve been wildly worthwhile.

Circumstances have been particularly optimistic prior to now couple of years. New automotive costs have hit report highs with components in brief provide and cars in excessive demand, particularly for Individuals who moved to suburban areas in the course of the Covid-19 pandemic and wanted their private autos for his or her essential mode of transportation.

The trials of the pandemic additionally pressured sellers to turn out to be much more environment friendly. Consequently, sellers have been raking in greater earnings on each unit offered.

Firms similar to the 2 largest companies, AutoNation and Lithia Motors, have been, respectively, shopping for again huge quantities of inventory and investing into extra acquisitions and different companies, similar to on-line retail structure.

However they might face a troublesome, uphill climb forward. Shoppers are getting more and more pissed off by the sellers’ excessive sticker costs and there are different shopping for choices: standard automotive manufacturers similar to Tesla, Rivian and others are promoting automobiles direct to the patron and extra motorists are shopping for automobiles on-line.

However these publicly traded teams do have lots of alternative to broaden additional regardless of these components. Presently, they solely management a small share of the market of greater than 16,000 dealerships.

Watch the video to be taught extra.

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