Shortage of BMWs dents Sonic's average new-vehicle profits
Lower supplies of BMWs pinched average new-vehicle gross profits for Sonic Automotive Inc. during the third quarter, but inventory levels are returning to normal.
Sonic's BMW dealerships in the South were short of BMWs since early in the year as a result of BMW's regional allocation system, but supplies bottomed out at the end of July, said Jeff Dyke, Sonic executive vice president of operations for the nation's third-largest retailer. The retailer's BMW supplies stood at 34 days in total at that time but were in the 20s at the Southern stores.
"There were months where I had no 3 series on the ground," Dyke said today after Sonic reported an 11 percent decrease in third-quarter net income.
Sonic's adjusted income from continuing operations rose 15 percent on record new-vehicle volume of 35,062 units.
With 15 stores, BMW represents 17 percent of Sonic's volume but up to 30 percent of its new-car gross profit, Dyke said. "If you've got your business dropping off that much, it's hard to make up with any brand," he told Automotive News.
For the quarter, Sonic reported average new-car gross profit of $1,987 across all brands, a decrease of $442 from a year ago. Sonic's typical gross profit on BMWs is $3,100 a car.
Although BMWs were scarce, Sonic's Honda sales boomed, Dyke said. That exacerbated the drop in average gross profit, he said, because the typical gross profit on Honda vehicles fell $300 to $400 as incentives heated up price competition.
The imbalance has now corrected itself, Dyke says. Profits on Hondas are back up. And BMW supplies are now back to just more than 50 days for the total company and in the low-to-mid 40s for its stores in the South, Dyke said.
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