CDK wins DMS contract extension with Sonic Automotive

CDK Global has extended its dealership management system agreement with Sonic Automotive Inc., a win for the DMS provider in the wake of two June 19 cyberattacks that challenged customer loyalty during a three-week shutdown.

CDK, of Austin, Texas, said Sept. 30 the contract terms are confidential, including renewal length, but has previously said that extensions are typically three to five years.

Renewal with Sonic keeps a significant automotive retailer on board with CDK. Sonic Automotive, of Charlotte, N.C., ranks No. 6 on Automotive News' list of the top 150 dealership groups based in the U.S., retailing 107,257 new vehicles in 2023.

Sonic CEO David Smith said in a statement extending its contract with CDK would help it access "vehicle search, purchase and service processes" designed to make car selling as seamless a transaction as possible.

CDK's relationship with Sonic reflects the company's continued investment to "constantly evolve our solutions for our rapidly changing industry," CEO Brian MacDonald said in a statement.

The extension covers the CDK DMS and its Dealership Xperience Modern Retail Suite of software tools.

CDK announced on May 28 it had extended its agreement with Group 1 Automotive, the fourth-largest dealership group in the country, involving its locations in the U.S. and the U.K. At the time, CDK CMO Barb Edson told Automotive News that contract renewal announcements would be made more frequently, in part to get the word out about its DMS-related innovation. CDK spends approximately $150 million to $200 million annually in R&D, she said.

Kim Irwin, senior vice president of smart digital for J.D. Power, said earlier this year it is wise for the larger DMS companies to announce major contracts and renewals.

"[CDK is] trying to build awareness that their platform is not old, that they're continually upgrading and going to the newest technologies," Irwin said. "How effective it will be, I'm not sure, but I don't think it's a bad strategy."

CDK's win with Sonic comes in the wake of cyberattacks that forced a three-week shutdown for its 15,000-plus automotive customers across North America. Many franchised dealerships expressed hesitation about renewal in the aftermath. CDK compensated affected dealerships with a month's rebate of its DMS fees.

CDK has contracts with five of the six top public dealership groups. Beyond Group 1 and Sonic, that includes No. 1 Lithia Motors Inc., No. 2 AutoNation Inc. and No. 5 Asbury Automotive Group Inc.

Changing market dynamics independent of the cyberattacks threaten some of those relationships.

Asbury's planned pilot of Tekion's DMS platform was supposed to start this year with four stores that could lead to a full switchover by early 2026. Asbury is suing CDK for the release of the four dealerships' data for the pilot. CDK, in turn, has filed a countersuit.

Lithia spent nearly $500 million earlier this year to purchase U.K. dealership group Pendragon, its fleet business and a piece of its DMS company Pinewood. Some observers have speculated the purchase could lead to Lithia not renewing its CDK contract, though Lithia CEO Bryan DeBoer has said previously "our partnership with CDK is long and deep" and a transition with any or some of its stores would be done in collaboration with CDK "if we get to that point."