While reporting generally robust first-quarter earnings, four publicly traded dealership groups gave updates on new projects. Here's what they said.
Public dealerships plan for growth
|Results for 4 publicly traded groups|
|Net income||$111.5 million||17%|
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|Net income||$14 million||–28%|
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|Net income||$35.9 million||14%|
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|Net income||$40.7 million||64%|
AutoNation has expanded AutoNation Express to 84 dealerships in five states -- Florida, California, Washington, Colorado and Arizona -- and says it is on track to have the initiative in all markets by year end.
"It's now clear that we'll hit our rollout target," AutoNation CEO Mike Jackson told Automotive News.
The initiative, which the company dubbed its digital storefront and launched in December, seeks to make buying a car more like purchasing other products online by converting the company's websites from informational to transactional.
AutoNation, the largest new-car retailer in the U.S., also is reducing its dependence on third-party lead providers, Jackson said.
Nineteen percent of AutoNation sales are to customers who come to the company by visiting AutoNation websites and providing contact information, and the share is rising, the company said. Customers coming from third-party sites represent 13 percent of sales, and that number is easing, AutoNation said. The share of new-vehicle sales from third parties fell to 11.1 percent in the first quarter from 12 percent last year.
"Third-party sites were growing as a part of our business. Then it levels off and now it has started to decrease, so that's a clear indication that investment in our own digital sites is paying off," Jackson said.
Adding more transactional capabilities to the digital storefront "will take our sites into the 20s and take our third-party dependence down into the high single digits over the next couple of years," he said.
AutoNation Express is managing service appointments and will add a "Buy Your Car" function in June, giving customers a price offer on a trade-in. Also planned: financing, slated for a third-quarter pilot; electronic paperwork; and AutoNation-branded products such as service contracts. All functions are expected to be in at least pilot phase by year end.
Sonic Automotive introduced One Sonic-One Experience last summer at a dealership in Charlotte, N.C., and then rolled it out in the fourth quarter to four more Charlotte stores.
The nationwide rollout of One Sonic-One Experience to the group's remaining 97 stores is expected to take this year and next, the company said.
"This is a major change in the way we sell and service vehicles in our stores. We've said this is going to take three years to implement across our organization. We're not going to be in a hurry. We're not going to make mistakes by rolling out too fast," Jeff Dyke, Sonic executive vice president of operations, told Automotive News.
One Sonic-One Experience offers no-haggle pricing and has a goal of completing a purchase in 45 minutes or less with one sales rep using an iPad. Sonic is betting that by making car-buying easier, it will become a preferred place to shop and thereby gain market share.
There has been a learning curve. For example, Sonic tried using its proprietary technology to run the website at one of the stores. But problems developed, and Sonic had to go back to the original website vendor.
In fact, Sonic's first-quarter net income tumbled 28 percent due to special charges for its initiatives: a $3.8 million pretax charge for One Sonic-One Experience and $4.9 million for EchoPark, its stand-alone used-vehicle stores. That makes seven of the last eight quarters in which Sonic has had to take a special charge, or note higher costs, related to one or both of those initiatives.
Dyke said another lesson learned in Charlotte was that Sonic wants to roll out the initiative piece by piece, with the pricing software on hold until it's fully functional.
This year, Sonic said it would start expanding the initiative to the second market, Chattanooga, possibly in May. But now Sonic plans to roll out just the technology side in that market starting in June or July, Dyke said. The rest of the initiative will be launched later; he didn't say when.
Sonic said the Charlotte dealerships that use the new sales approach have gained share against same-brand rivals, but overall the company's retail new-vehicle sales rose just 4.3 percent, trailing the U.S. industry's 5.6 percent gain in the quarter.
The company also launched its EchoPark stores in 2014 with two neighborhood stores and a hub in the Denver area. EchoPark will feature a large hub store with smaller neighborhood stores in each market.
Sonic aims to have EchoPark stores in more than 50 markets across the country. Dyke said the company has chosen the next three markets for EchoPark, but declined to name them. "We're not saying because it pushes the real-estate prices up when they know we're trying to buy," Dyke said.
"This is no experiment," he said. "We are rolling forward. We are meeting or beating our expectations."
Asbury Automotive Group is trying to turn its three Q auto stores, which sell used vehicles only, into moneymakers by year end.
"Our losses continue to decline, and we remain very focused on trying to get these stores to run-rate profitability by the end of the year," Asbury CEO Craig Monaghan told Automotive News. "And we think we've got a good shot at doing that."
Asbury launched Q auto last year with three stores in Florida. The retailer is holding off on more stores to focus on making a profit at its existing ones.
Monaghan is happy with the progress. The approach used at Q auto is what "we think will be tomorrow's version of a car store," Monaghan said. "So it's a one-price transaction on a car, it's a fixed price on the F&I product, there's a sales associate who's not paid commission, the traditional F&I desk does not exist."
Front-end grosses and finance-and-insurance income per vehicle retailed are lower, but the cost structure is also "much lower," he said. Overall, "We are actually moving slightly ahead of where we expected to be."
Lithia Motors Inc.'s integration of its purchase last year of DCH Auto Group sent revenue and profits soaring. In addition, "We've achieved some cost savings by integrating our marketing departments, IT departments, legal department, and we're in the process of finalizing the integration of corporate accounting," Lithia CEO Bryan DeBoer told Automotive News.
Lithia bought DCH in October. It had predicted the integration would take two years, but DeBoer said the companies will be fully integrated by the end of June.
On the store level, Lithia is encouraging DCH dealerships to adopt an in-house detail center, which Lithia stores run as a profit center. "It's a high-margin, low-expense department," DeBoer said. Four of DCH's 27 stores have stopped using outside vendors and brought car detailing work in-house. Three others will have it in the second quarter, DeBoer said.
About three-quarters of DCH's stores have the space and staff to add detail shops, but it probably will take two years before most of the stores do so, he said.
Besides doing customer-pay work, a detail center also can save money preparing new and used vehicles for sale. DeBoer said a typical vendor charges $80 to $100 to detail a used vehicle. Lithia does it internally for $20 to $45.
Hannah Lutz contributed to this report.
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