U.S. auto dealer profits ease from 2022 peak, M&A drive stays high - report

Sonic Automotive

17/03/2023 19:53

March 17 (Reuters) - 
    Earnings of U.S. auto dealers have eased over the past few
months from record levels hit in 2022 as margins came under
pressure from high interest rates and inflation, a report showed
on Friday.  
    In 2022, profits reached an estimated $6.5 million per
location for dealerships owned by public auto retailers, more
than triple of pre-pandemic levels, according to the report from
Haig Partners, a buy-sell advisory firm to auto dealers. 
    "We've polled owners of hundreds of dealerships over the
past few weeks, and most expect profits will decline 10%-15% in
2023," said Alan Haig, president of the firm. 
    But dealers still expect profits to remain over twice as
high as 2019, powering demand for acquisitions in the drive to
expand, the report said. 
    "The result of high profits and strong demand is that we
have seen record-high prices being paid for dealerships in the
last six months," Haig said. 
    Last year, 566 dealerships were acquired. 
    Lithia Motors Inc  LAD.N , Asbury Automotive Group Inc
 ABG.N  and Sonic Automotive Inc  SAH.N  have set lofty revenue
goals to achieve by the end of 2025. 
    To hit those targets, the three auto dealers would together
need $48.7 billion in revenue and purchases of nearly 500
dealerships, the report said. 
    The Haig Report tracks trends in auto retail. It is based on
data gathered from public sources and interviews with leading
dealer groups and dealers, bankers, lawyers, and accountants who
specialize in auto retail.

 (Reporting by Kannaki Deka in Bengaluru; Editing by Devika
Syamnath)
 ((Kannaki.Deka@thomsonreuters.com;))