Despite numerous challenges, auto dealers continue to deliver strong financial performance, with profits per store remaining double pre-pandemic levels and rooftop sales continuing on a record pace.
That is the topline takeaway from the recently released Q3 2024 Haig Report from Haig Partners LLC that provide an analysis of the trends shaping the automotive retail industry. The report noted that affordability concerns, interest rate pressures, and geopolitical uncertainties, the auto retail continues to remain resilient.
“It is truly remarkable,” said Alan Haig, president of Haig Partners, in a statement released with the report. “Dealers have demonstrated time and again their ability to adapt, innovate, and thrive, even amidst substantial headwinds.”
Rebounding Economy
And Haig Partners see the potential rebound in retail volumes as falling interest rates, moderating inflation, and steady GDP growth have bolstered consumer confidence, that creates an environment for improving vehicle affordability.
Dealership M&A activity grew in July, August and September, as 92 rooftops traded hands— a 10 percent increase over the previous quarter. Private dealers accounted for 96 percent of these acquisitions, that the authors say signals confidence in the long-term profitability of the industry.
Haig officials noted the average blue sky value is down 12 percent from year-end 2023 but remains approximately double pre-pandemic levels. The average estimated blue sky of a publicly owned franchised dealership is forecasted at $21.3 million for the latest quarter that favors sellers of strong-performing franchises.
Key Trends
“The buy-sell market is undergoing a healthy evolution,” added Haig. “Sellers of strong franchises are securing values near their peaks, while value-conscious buyers are finding opportunities in underperforming brands. And there are plenty of brands in the middle that are slowly declining in value as profits normalize.
Other key trends from the report include:
- Franchise performance has varied significantly, with brands like Toyota, Honda, and Lexus maintaining strong profitability while others, such as Stellantis and Nissan, face challenges. As a result, high-performing franchises command premium prices, while underperforming brands offer opportunities for value-oriented buyers.
- Three changes were made to franchise blue sky multiples and franchise dollar value for Q3—Audi with a .25x reduction, Subaru with a .50x reduction, and an increase on Mazda by .25x.
- Acquisitions slowed for public retailers for the quarter with the largest acquisition made by Lithia with the acquisition of three stores. The average publicly owned dealership made an estimated $1.0 million in pre-tax income, a 7 percent decrease from Q2 2024 and a 28 percent decrease compared to Q3 2023.
Buying Opportunities
Haig officials said publicly traded auto retailers have scaled back acquisitions, focusing instead on optimizing existing operations and divesting non-core assets. This trend creates opportunities for private buyers to invest in dealerships at lower prices.
“The buy-sell market is undergoing a healthy evolution,” added Haig. “Sellers of strong franchises are securing values near their peaks, while value-conscious buyers are finding opportunities in underperforming brands. And there are plenty of brands in the middle that are slowly declining in value as profits normalize.”
Haig is on track to sell around 60 dealerships in 2024, which would be our best year that includes setting records with the highest prices paid on many franchises.
“While profits have declined from their pandemic-era highs, they remain well above historical norms, creating robust opportunities for those considering entering or exiting the industry,” said Haig.
