At public retailers, inventory still hasn't turned a corner

Despite some minor gains in new-vehicle inventory levels, executives leading the nation's public dealership groups say they still aren't seeing signs that a material shift in supply is underway.

All six major public franchised retailers in late July reported that new-vehicle days' supply level improved by two to five days between the end of March and the end of June. But company leaders generally said they believe the constrained inventory situation has yet to turn a corner toward lasting recovery.

Group 1 Automotive Inc. CEO Earl Hesterberg said last week that he doesn't think an inventory rebuild is "going to happen overnight."

"I continue to remind myself of the staggering fact that pre-COVID, we had 29,000 new vehicles in inventory at Group 1, and we were a much smaller company — we had 30-some less dealerships," Hesterberg said on a call with analysts. By contrast, Group 1 hasn't "cracked 4,000 new vehicles in inventory yet" this year, he said.

The retailer had 3,600 new vehicles in stock in the U.S. at the end of June, said Daryl Kenningham, president of Group 1's U.S. operations. Its supply of new vehicles in the U.S. on June 30 was 11 days, up from nine at both the end of March and December.

Group 1's pipeline of customer orders has stayed "consistently strong with no discernible change in presales or inventory aging," Kenningham said.

Penske Automotive Group Inc. had a 12-day supply of new vehicles in the U.S. at the end of June, up from nine days at the end of March and eight at the end of December.

"Everything that's coming in is going back out," CEO Roger Penske said last week on an analyst call.

Penske currently has about 3,100 new vehicles in stock, spokesman Anthony Pordon said, calling inventory levels "fairly consistent" over the past six to nine months. He said Penske doesn't expect levels to "change materially anytime soon."

Before the coronavirus pandemic, the retailer carried more than 14,000 new vehicles, Pordon said.

"We haven't really seen a decline in preorders either," Penske CFO Shelley Hulgrave told Automotive News. "Customers continue to fight for their space in line."

Supply of new vehicles was higher in the U.K. at the end of June, at 32 days, the company said.

Sonic Automotive Inc. reported an 18-day supply of new vehicles at its franchised dealerships at the end of June, compared with 15 days at the end of March.

Sonic continued "to see limited new-vehicle production and inventory levels due to supply chain disruptions and strong consumer demand for new vehicles," CEO David Smith said last week.

That contributed to Sonic's 33 percent drop in same-store sales of retail new vehicles during the second quarter, worse than industry's retail decline of 20 percent, Smith said. He attributed that in part to Sonic's brand mix, which is weighted toward luxury and import brands, which have had lower supply levels than domestic brands.

Lithia Motors Inc. reported a 32-day supply of new vehicles at the end of June, up from 27 days on March 31. Lithia's days' supply count isn't directly comparable to rivals' numbers because Lithia's figures include in-transit vehicles and vehicles from its Canadian operations.

Lithia CEO Bryan DeBoer said on July 20 the company had a 60-day supply of domestic brand vehicles, "so we have pretty good flow even though there's some in-transit on that." Lithia's softness is in import brand vehicles, with a 16-day supply and "where we really are selling every car that we get about as quick as we can get them," he said. Lithia had a 29-day supply of luxury brands.

Lithia's new-vehicle volume fell 8.5 percent in the quarter, but the company's aggressive dealership acquisition strategy is helping it sell more new cars than competitors.

Asbury Automotive Group Inc. said it had a 13-day supply of new vehicles at the end of June, up from just 10 days at the end of March. However, deliveries that landed right at the end of the quarter skewed that figure upward, CEO David Hult said.

Asbury had been at "several days below that number," Hult said last week. The retailer has found itself particularly short of foreign brands and domestic trucks, he said. "It's really spotty by brand."

Consumer demand for new vehicles remains high, and Asbury presells about half the vehicles it receives, Hult said.

"We're turning what we're getting," he said.

Hult said Asbury doesn't expect new-vehicle supply to improve this year — or even much next year.

"We do not anticipate a meaningful recovery in new inventory levels in 2022," Hult said.

AutoNation Inc. said its supply of new vehicles stood at 11 days at the end of June, up from eight days at the end of March.

Supply chain disruptions continued to hamper new-vehicle production in the second quarter, AutoNation CFO Joe Lower said July 21. The company's new-vehicle revenue fell 14 percent year over year as a result, Lower said.

AutoNation expects new-vehicle demand will continue to outpace available supply in the second half of 2022, he said.

The retail giant had 10,782 new vehicles in inventory as of June 30, down from 14,338 a year earlier.

Melissa Burden, George Weykamp, Jack Walsworth and John Huetter contributed to this report.