Car dealerships have been mom and pop businesses for much of their existence. But the industry is slowly consolidating.
Six publicly traded dealership groups — AutoNation, Lithia Motors, Group 1 Automotive, Sonic Automotive, Penske, and Asbury Automotive Group — have been on a shopping spree in recent years, buying up a small but growing share of dealerships. And they’ve been wildly profitable.
Circumstances have been especially positive in the past couple of years. New car prices have hit record highs with parts in short supply and automobiles in high demand, especially for Americans who moved to suburban areas during the Covid-19 pandemic and needed their personal vehicles for their main mode of transportation.
The trials of the pandemic also forced dealers to become a lot more efficient. As a result, dealers have been raking in higher profits on every unit sold.
Companies such as the two biggest firms, AutoNation and Lithia Motors, have been, respectively, buying back massive amounts of stock and investing into more acquisitions and other businesses, such as online retail architecture.
But they could face a tough, uphill climb ahead. Consumers are getting increasingly frustrated by the dealers’ high sticker prices and there are other buying options: popular car brands such as Tesla, Rivian and others are selling cars direct to the consumer and more motorists are buying cars online.
But these publicly traded groups do have a lot of opportunity to expand further despite these factors. Currently, they only control a small share of the market of more than 16,000 dealerships.
Watch the video to learn more.