Sonic Automotive Inc. says it will resist automakers' demands for grandiose upgrades of its new-car dealerships.
The pushback comes as Sonic and other public auto retailers shift their focus to used-car operations, which offer better returns.
"We're just not going to get caught up in the game of building these facilities like we've been asked to build in the past," said Jeff Dyke, Sonic's executive vice president of operations. "We're not going to be bullied into that situation, either."
Sonic, of Charlotte, N.C., can build a new EchoPark store, its stand-alone used- only outlet, for about a third of the cost of building a new franchised dealership, Dyke told Automotive News.
Sonic is the nation's fifth-largest dealership group. It has six EchoPark stores in Colorado and two in the San Antonio market. It will open a third San Antonio store, two stores in Charlotte and one in Houston this year.
The majority of Sonic's capital outlays this year will go toward expanding EchoPark's presence rather than franchised dealership construction — unless a franchised store offers a high return on investment, Dyke said. Because it often costs $30 million to $50 million to build a dealership, he said, the return would have to be significant.
CEO Scott Smith said those costs should give all dealers pause.
"It doesn't pencil to build a great, big, huge facility and upgrade when at best you hope to break even with increased volume," Smith told Automotive News. "The only people who win in that are the manufacturers. The dealer is taking all the risk."
Smith said the problem faces dealers of all sizes. "Dealers need to push back on these manufacturers and hold them accountable because [the automakers] have no skin in the game."