Lithia makes quick gains 1 year into 5-year growth plan

One year into its five-year plan to reach $50 billion in annualized revenue, Lithia Motors Inc. has already doubled its 12-month dealership acquisition target.

Lithia, now the second- largest public dealership group in the U.S. based on number of stores, has added $7.8 billion in annualized revenue since rolling out its five-year plan in July 2020. Lithia's goal is to deliver and service vehicles within any 100-mile radius in the country through expansive growth, improved operational development and leveraging its captive finance company.

Lithia is 35 percent of the way to its goal of $22 billion in acquisition growth by 2025. Its nationwide network of 257 franchised dealerships is foundational to its growth plan, expanding its reach with a growing reservoir of new- and used-vehicle inventory.

Lithia CEO Bryan DeBoer has said the group would consider a merger with another public group to round out the retailer's footprint in the Midwest and Southeast markets.

Mark Johnson, president of buy-sell firm MD Johnson Inc. in Enumclaw, Wash., said Lithia's acquisition activity is driving more sales in the market. Johnson represented Planet Honda in its April sale to Lithia.

"When you get someone like Bryan out in the market buying, it creates a lot of confidence for other dealers that are thinking about buying something but also gives the impression that it might be a great time to sell," he said.

DeBoer's hands-on approach to acquisitions has garnered him a reputation as a decisive negotiator with a history of closing seemingly complex transactions, Johnson said.

"He's a very difficult guy for other acquirers to compete with because he doesn't have issues with speed or decision-making," he said. "He knows what stuff's worth."

It is unclear at this time how many Lithia dealerships use Driveway as their digital retailing platform, but the company said it is on track to achieve a run rate of 15,000 Driveway transactions by year-end.

Lithia's captive finance company, Driveway Financial, is slated to capture 20 percent of all its transactions online and in person.

The company would not disclose what percentage of those deals the fintech company originates on average but said as of March 31 the company maintained a $256 million auto loan portfolio.

In 2015, Automotive News reported the captive — previously known as Southern Cascades Finance Corp. —had just $15 million in contracts.

The key tenets of Lithia's goals — explosive growth and leveraging technology — will continue to serve the company beyond the five-year mark, said Rick Nelson, an analyst at Stephens who has covered Lithia for more than two decades.

For Wall Street, Lithia's ambition is already paying dividends. The company has become the highest-valued automotive retailer by stock market investors, which will aid the company in its continued plans for aggressive growth.

"There's no telling how big they'll be by 2025," Nelson said.

"They're on track to achieve their targets well ahead of schedule. When they hit those targets, I believe they'll put forward some new [ones]."