A GOOD TIME TO BE AN AUTO DEALER

Credit: Steve Greenfield CEO/Founder at Automotive Ventures, LLC I recently had a chance to examine the performance of the publicly-traded auto dealer groups, and I’ve included a few slides to support my position that it's a good time to be an auto dealer. By pretty much any characterization, dealers have navigated through first COVID and then a global microchip shortage in stellar fashion. Front-end and back-end gross profit per unit sold are at historical highs, while they’ve also found ways to successfully reduce operating costs. The most important lesson to be learned through all of this may be how artificially reducing supply allows for more profit realization for the seller of the scarce good. According to NADA, 2021 average dealership total sales set a record, topping $71 million. And the good times seem positioned to continue to roll throughout 2022. Public groups have recently reported their Q1 2022 numbers, and they continue to experience record profitability. J.D. Power forecasts that full-year 2022 profitability for dealers will be 15% to 35% higher than in 2021. BUT THERE ARE WARNING SIGNS ON THE HORIZON Dealers are facing more uncertainty about the future than ever before and will need to be on their best game as inventory levels normalize and many of these industry dynamics begin to affect their businesses. This juxtaposition of record-high profitability with heightened levels of uncertainty around the future is the exact reason that we’ve launched the new Automotive Ventures DealerFund, which will harness the collective wisdom of dozens of dealership owners into investment areas for the new fund. Dealers participate in the financial upside while investing in new technology products that benefit their operations.