We are pleased to publish our fourth quarterly report on key financial metrics composites based on the dealer Business Management data we receive on your behalf.

As we all know, the US market continues to be very profitable for franchise dealers across the board. This is despite the headwinds of inventory shortages due to the ‘Chipdemic’ and other supply chain constraints that we have not seen for a very long time. The inventory situation has affected overall retail sales, but the profitability continues to grow dramatically as dealers are able to retain higher margins on both new vehicles as well as pre-owned vehicles (which continue to show significant YOY growth).

All OEMs maintain a positive YOY increase on ROS due to an outstanding gross profit in all department. YOY ROS upward trend continues, despite the volume decline due to favorable demand and low supply, increasing from an average of 3.6% to 5.9%. The percentage of loss retailers / dealers has dropped dramatically from 11.2% to 3.2% of the network.

We see that the dealership expenses have been going up too, perhaps recovering from sharp reductions last year. The Total Dealership Operating Expense has increased 13.5% YOY. But as Total Dealership Gross Profit increased 38.9% YOY, the increase in Operating expenses did not have a large impact on the ROS. In fact, the Total Op Exp % GP declined from 95.7% to 78.3%.

New vehicles
Given the inventory shortage, the Average Retail Units drops 19% YOY from 77 to 62 units/per dealer. This is because the average Days Supply for New Vehicle has dropped from 72 days to 22 days this year, with the minimum being 17 days. As we read in Automotive News, this trend continues to worsen.
Vehicle profitability, as mentioned above, continues to grow dramatically. The average gross profit per unit increases significantly from -$17/unit to $3,130/unit and NV Dept GP Contribution jumped from 28.1% to 38.7%.

Used Vehicles
The Pre-Owned Vehicles market continues to behave similarly – i.e., reduction in units sold while increasing profitability. UV units decrease 12.3% YOY, however, gross profit increase 28.5% YOY from $2,228 to $2,863. Interestingly, dealers are able to maintain the reconditioning expenses flat at around $600+.

There was a sharper reduction in CPO Units sold. CPO units decreased by 18.8% but gross profit per unit increased significantly at 62% YOY from $2,171 to $3,517. Average reconditioning also remains flat at $1,300+.

Fixed Operations
Fixed Operations is also showing similar trends – while the RO volume has remained relatively flat, the margins have gone up for both Service and Parts.

Overall Service Gross Profit/RO count increased 12.3% YOY with increases experienced by both Customer Pay GP/RO (14.4% increase) and Warranty GP/RO (11.8% increase).

The overall Parts Gross Profit/RO increases 20.5% YOY with Customer Pay GP/RO and Warranty GP/RO increases 16.4% and 12.8% respectively
The above increase did not have much impact on Fixed Absorption, which essentially remained flat at 65.0% vs 64.2% in 2021. This is because dealers are adding back overhead expenses post-covid while Fixed Operations gross profit slightly increase year over year.

Note: *The data presented in this article is a composite of information collected from our clients, including Audi, Hyundai, Kia, Volkswagen, and Volvo. The gathered data has been meticulously analyzed to provide accurate and comprehensive insights for the purpose of this article.
Optimum Info Employee: Linda Sudibjo

Linda Sudibjo

Director - Account Management

Linda is a Business Management and Financial Analysis expert with experience in the Automotive Industry working for renowned OEMs.

Optimum Info Employee: Mark Derengowski

Mark Derengowski

Director – Account Management

Mark has devoted an entire career in the Automotive Industry with both OEMs and dealers thanks to an unmatched passion for cars.

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