As strong demand and low inventories of new cars drive record prices in the U.S. auto industry, dealer group Sonic Automotive reported record third quarter revenue of $ 3.1 billion, a 20.6% increase over a year ago, and net profit of $ 84.5 million for the quarter, up 41.2%,
“Consumer demand is still very, very strong,” Sonic Automotive CEO David Smith said in a telephone interview Oct. 28 following a conference call to announce third quarter results.
“Our supply of new vehicle days is at an all-time low. Demand for new vehicles is at an all time high, and we are achieving all-time record gross profit per vehicle in our new vehicle sales, ”he said.
Smith said during the earnings call that Sonic’s 84 new car franchisees had a record of just 2,400 new cars and trucks in stock, which represents a 10-day supply at the current sales rate. A year ago the stock was around 13,000 units.
The supply of used vehicles for the franchised dealers was approximately 8,200 units, or a 27-day supply, which Smith said was in line with Sonic’s vehicle inventory target. opportunity. That’s not counting the inventory of Sonic’s EchoPark used car locations, which had a used vehicle inventory of 9,800 units, or a 41-day supply.
Jeff Dyke, president of Sonic Automotive, said he believes low inventories may hit a low, followed by a slow recovery. In addition to a shortage of computer chips, he said there were disruptions in the supply chain for other components, as well as a shortage of manpower, all of which contribute to the problems of ‘inventory.
“We’re not going to go below the eight, nine, 10 day supply. It’s starting to move back north as we go forward from here, but it’s going to be slow, ”Dyke said. Inventory is expected to continue to be a problem until the first half of 2022, he said.
As a result, for Sonic’s franchised dealers, the average gross margin per unit of new vehicles was $ 5,051. That’s almost double what it was a year ago, and more than double the third quarter of 2019, before COVID, the company said.
The conference call was Sonic’s first quarterly report since announcing a $ 700 million deal last month to acquire RFJ Auto Partners, a private dealer group based in Plano, Texas, with 33 dealers. in seven states.
Sonic expects the acquisition to be finalized in December. Former RFJ dealers would add approximately $ 3.2 billion in annual revenue. It would also introduce Charlotte, North Carolina-based Sonic Automotive to six new states: Washington, Idaho, Montana, Indiana, Missouri, and New Mexico.