Since Lithia rolled out its goal in July to reach $50 billion in revenue by 2025, the group has acquired dealerships representing $3.3 billion in annual revenue. DeBoer said last week Lithia currently has $3 billion in planned acquisitions under contract that have yet to close.So far, the Medford, Ore., com- pany, which generated $13.1 billion in revenues last year, has achieved its desired density only in its Northwest U.S. backyard. The Midwest and Southeast remain largely devoid of Lithia stores. Lithia has only one or two stores, for example, in the Southwest region, which means that to deliver a vehicle to a digital customer in that area, that car may have to travel nearly 500 miles.
On Jan. 31, reports surfaced that Lithia plans to acquire southeast Michigan's Suburban Collection, one of the nation's largest privately owned dealership groups. Suburban ranked as the No. 18 dealership group in the U.S. based on new-vehicle sales in 2019, when it generated $2.7 billion in revenue, according to data compiled by Automotive News.
Lithia executives declined to comment on the reported Suburban deal.
Tyson Jominy, vice president of data and analytics at J.D. Power, said Michigan has the highest lease penetration market in the country, largely thanks to automaker employee incentives extended to family and friends.
"You're going to get a large influx of these lightly used new models coming back," he said. "For Lithia, who is looking to do a lot of used-vehicle acquisition, this is going to be a great pipeline to their entire operation."
An influx of off-lease vehicles would help lower the average age of Lithia's used-vehicle inventory, which currently sits at 4 years.
A dense dealership footprint is integral to Lithia's strategy with Driveway, an omnichannel retailing solution it touts as a way for customers to never set foot in a traditional dealership again. Omnichannel refers to technology and processes aimed at providing a seamless buying experience to consumers whether they shop online, in store or both.
Because the tool will be rolled out to all Lithia regions, it's important to Lithia to have physical locations to support those sales. Logistical expenses in shipping cars cause an undue cost burden on stores and customers. Lithia is chasing a dealership network scale that would provide "massive" advantages over digital and used-only competitors, DeBoer said.
"We need more density," he said. "We need more selection to make sure that we have the offerings to consumers that are closer to them."