Crowe MacKay LLP is one of 11 CPA firms (and the only Canadian firm) that make up Auto Team America. The group meetings regularly to review Automotive Industry developments and to exchange information and technology. Our Automotive Lead Partner, Conven Tang, brought back these notes from the most recent meeting.
- Many rural dealers feeling the pinch as larger metro dealers have increased their reach through advertising campaigns and social media.
- Many dealers abandoning the idea of subscription services as it did not work well at their dealerships due to fleet requirements and tying up inventory. Not as big of a disrupter as once thought.
- Projected 17M units for 2019 is on target. It has been around that mark for the last 5 years and dealers have shown that they could make a profit at that level.
- Spending by the public companies have decreased. Divested in 55 rooftops while only acquiring 18.
- Carvana sales volume up to $12B and Carmax at $13.5B. The total sales volume of all the public companies equates to $11B. No real growth in the public companies except for Lithia.
- Battle between the state and federal governments regarding emission standards. Federal government came out with a set of standards and now the states are protesting saying it should be state regulated.
- Lawsuits still at the forefront of dealership
- Various lawsuits regarding accessibility of website whereby persons with disabilities contest that the website is a public domain and should be accessible by all.
- Lawsuits with DMS providers regarding the use of personal information as well as turnaround time and cost for transfer of information to new provider.
- FTC proposed amendments to customer information storage projected to cost dealerships $294K in the first year and $277K every year after. Proposed amendments include data encryption, inventorying, multifactor authentication, audit trails, user tracking, penetration testing and incident response.
- Dealer Finance
- Ford Credit is more willing to sell financing to retail customer versus dealer flooring.
- New financial institutions getting into dealer financing such as Live Oak Bank.
- Sale and leaseback option is becoming more popular with the rising price of real estate.
- Average cap rate in the first half of 2019 at 7.5%.
- Gross profit per new vehicle up 2.5% to $2,171. Gross profit per used vehicle down 2.9% to $1,453. Finance and insurance gross up 5.6% to $1,907 on average.
- Fixed operations growing with a 4.3% increase in sales.
- Average net income expected to increase 0.6% from 2018 results.
- Average Blue Sky at $6.6M. Up 0.5% from prior year.
- Slight decline in multiple of luxury brands and Nissan, increase for Volvo and Subaru and all others remain the same compared to Q2 of prior year.
- Very little action with regards to new open points during the first half of 2019. Jaguar Land Rover dealers most active as Land Rover buying Jaguar dealerships with the promise of a new add point.
- Less buy/sell activity regarding Ford dealerships. Ford dealers excited for new products coming out this year and should jump start demand for dealerships.
- GM focused on manufacturing vehicles prior to the strike and dealers have the inventory to get them past the next few months. Parts, on the other hand, may be in shortage for the upcoming months.
- New dealer agreement for GM commencing 2020. Need to review the terms as there have been instances of clauses that have been deleted/added that may not be favorable to the dealer.
- VW short on inventory, but doing good on selling reworked vehicles. Bosch lawsuit still outstanding as the courts are making a decision to see if dealers were directly affected to determine settlement amounts.
- Toyota and Lexus have started to do a reassignment of territories of service. Now based on driving distance versus air mile. Would be better if it was based on drive time, but none the less, an improvement from before.
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