Alan is a trusted expert in auto retail, having been involved in the purchase or sale of more than 380 dealerships with a value of over $5 billion. Alan is often quoted in the media and is a frequent speaker at auto retail conferences around the country. He is the creator of the report that identifies trends in auto retail and their impact on dealership values, The Haig Report, and he is co-author of NADA’s “A Dealer Guide to Buying and Selling a Dealership.”
In this episode David and Alan discuss the fascinating shifts in the automotive retail landscape, including the roles private consolidators, public companies, and long-term investors are playing in shaping the future of auto dealerships.
What we discuss in the episode
Alan notes that 2022 was the second-best year on record for buy-sell transactions, with about 520 stores changing hands. The pandemic led to a surge in dealership profits, resulting in excess cash reinvested in the business. This boom, however, sparked concerns about potential tax increases and the belief that the industry had reached peak value, prompting many owners to sell their dealerships.
As they look forward to 2023, David and Alan discuss possible challenges dealerships might face, including higher expenses, new car margin compression, and the elimination of floor plan assistance. Nevertheless, they remain optimistic about the industry’s future, highlighting the continued confidence in the franchise system and the significant amount of cash on dealership balance sheets. They also discuss the role of OEM-to-dealer incentives in shaping the industry.
One notable statistic is that Lithia Motors has outperformed Amazon, Apple, and Microsoft in stock performance since the 1990s, demonstrating the potential rewards for investors in the auto dealership space. Despite a decrease in acquisitions by public companies, Alan remains optimistic that Lithia, Sonic, and Asbury will need to acquire dealerships to meet their 2025 revenue goals. Private consolidators, like Liza Boes, have shown impressive growth through strategic acquisitions in local markets.
Not all growth needs to focus on national scale; many large family-owned dealership groups are adopting local scale strategies, creating a strong local brand. This approach can lead to increased cost efficiencies, better talent recruitment and retention, and a more sustainable growth model. Private equity firms and family funds are also investing heavily in auto retail, attracted by the industry’s resilience and long-term attractive returns.
These long-term investors are interested in the automotive retail industry because of its proven track record of success, even in the face of numerous challenges. Auto dealerships have been likened to the “cockroach of retail businesses,” with their ability to withstand and adapt to changes in the market.
As we look ahead, it’s clear that the future of auto dealerships will be shaped by a diverse range of growth strategies and investors, presenting new opportunities for growth and innovation. From private consolidators to public companies and long-term investors, the automotive retail landscape is evolving, presenting new opportunities for growth and innovation. Don’t miss this insightful episode for a detailed analysis of the trends shaping the future of auto dealerships.
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