Public dealership groups grapple with EV pricing, inventory

Electric vehicle pricing and days' supply of high-priced EV nameplates appear to be top of mind for some of the nation's largest auto retailers, especially amid price-slashing by U.S. EV market sales leader Tesla Inc.

Sonic Automotive Inc. President Jeff Dyke, on the company's July 27 second-quarter earnings call, said Tesla's pricing strategy has been felt not only by its franchised dealerships selling used Teslas, but by its new-vehicle business overall.

"It's certainly playing a role against electric vehicles from a new-car perspective because [automakers are] having to get more aggressive in terms of their pricing," said Dyke, who praised EVs from Mercedes-Benz, BMW, Audi, Lexus and Toyota, brands that Sonic represents in its dealership portfolio.

"They're just producing an amazing product," Dyke said. "And it's a better product than Tesla. And as the pricing gets right, the inventory levels come up, you're gonna see a higher mix of electric vehicle sales."

According to Cox Automotive data, dealerships had a 100 days' supply of EVs on average in July, down slightly from June's 103 days. The figure excludes brands that sell directly to consumers, such as Tesla.

And while some of the public groups have reported far lower days' supply of EVs, the retailers represent automakers that have brought out waves of EVs to compete with Tesla.

"You've had a lot of people buying Teslas already," David Whiston, an analyst with Morningstar in Chicago, told Automotive News. "And now, with the price cuts Tesla's doing, they've been able to get new buyers who perhaps wouldn't have bothered buying an EV before."

Tesla has cut prices by more than 12 percent so far in 2023, according to Kelley Blue Book data as of early August. On Monday, Tesla reduced starting prices by $10,000 on its flagship models, the Model S sedan and Model X crossover, by introducing new versions with less battery range and slower acceleration.

EV prices overall fell slightly in July from June to an average transaction price of $53,469, Kelley Blue Book found.

Dyke said it's too early to say if consumers are catching onto the idea of legacy automakers creating a better product, but noted that Sonic has added EVs into its loaner fleets to let people get used to driving one.

"I think we've got another six months to a year of sort of crossing some new boundaries with the electric vehicle," he said. "If the manufacturer[s] could get the pricing right and they keep their day supply in line, which are two big questions that they really need to focus on, then I think they can do very, very well. But if they're going to launch vehicles that are $112,000 when the counterpart combustion engine vehicle is $20,000 and $30,000 cheaper, they're gonna have a problem."

The manufacturers are "very well aware of that," he added, and some are doing a better job than others.

Whiston said Dyke's comments equate to automakers giving consumers a reason to not purchase internal combustion engine vehicles.

"We're just finally about to start seeing much more realistically affordable electric vehicles that have the potential to be high volume," Whiston said, pointing to the Chevrolet Equinox EV. "But at the same time, we're still seeing a lot of very high-end expensive stuff. Most recently, the [Cadillac] Escalade IQ, starting at around $130,000."

Sonic CEO David Smith, on the company's earnings call, said one of the retailer's Mercedes stores in California, which he did not identify, is the No. 1 dealership for EQS sales. A Mercedes spokesperson said the automaker could not confirm the sales metric and referred Automotive News to Sonic.

"That part of the country has been faster to adopt that car and so that store has actually been buying EQS from other parts of the country and shipping them out there," Smith said.

Penske Automotive Group Inc. CEO Roger Penske also pointed to a high supply of EQS vehicles on the retailer's July 26 second-quarter earnings call.

"When you look at the U.S., EQS for Mercedes, we've got [a] 190-day supply right today as we sit here," Penske said. The group had a 113 days' supply for all Mercedes battery-electric vehicles, he added.

Also on the call, CFO Shelley Hulgrave said Penske had a 54 days' supply of new EVs overall as of July 26.

Group 1 Automotive Inc. has a rising inventory of EVs, but those are a relatively small number of total inventory, CEO Daryl Kenningham said on the Houston company's July 26 second-quarter earnings call.

"Our EV supply is 61 days, and so it is a little higher, but a small universe for us," Kenningham said. "We have roughly 11,000 units in stock … 740 of those are EVs. It's hard to draw conclusions about the general trends based on that small of a number."

On Asbury Automotive Group Inc.'s second-quarter earnings call July 25, Dan Clara, senior vice president of operations, said EV tax credits have the largest impact on EV demand.

When the credits are available, sales are at a "much faster pace," he said. If an EV lacks tax credits, Asbury feels a greater need to discount it, Clara said.

"We see that in different pockets that we operate — both positively impacted and then negatively," he said.

Gail Kachadourian Howe, Mark Hollmer and John Huetter contributed to this report.