AutoCanada Inc. isn’t getting out of the new-vehicle enterprise, however the dealership group that owns 83 franchised shops in Canada and the United States is leaning on the used facet of its operation to develop gross sales and supply a hedge in opposition to ongoing turbulence within the new-car market.
The firm is “beholden” to the automakers it represents for new-vehicle stock, stated AutoCanada Executive Chairman Paul Antony, however the “unconstrained nature” of the used-vehicle section provides the corporate “wide-open runway” to develop.
“We want to become untethered to the constraints that we have on the new-car business, and [with] selling just new cars,” Antony stated on the corporate’s newest quarterly earnings name May 4.
Used-vehicle gross sales progress has been a key intention for Antony and the Edmonton-based dealership group’s administration crew since taking up management of AutoCanada almost 5 years in the past, and one the corporate has made appreciable headway on. In 2018, the corporate bought 0.62 used automobiles for each new automobile pushed off the lot. In the primary quarter of 2023, that ratio had climbed to 1.72 used automobiles for each new sale.
USED ‘OFF THE CHARTS’
Antony expects AutoCanada’s used quantity, and the broader used market, to proceed to strengthen as new-vehicle inventories stay “constrained for most brands.”
“Used is going to be off the charts for the next three to four years,” he stated, pointing to restricted automobile manufacturing as a result of pandemic and microchip scarcity.
“We’re short roughly nine to 10 million cars that weren’t built for North America in the last three to four years, which means that we’re short nine to 10 million used cars that haven’t been built.”
Customers are additionally feeling monetary stress due to current rate of interest hikes, main many to hunt automobiles with cheaper price factors, which frequently means used, Antony added.
AutoCanada’s profitability fell within the first quarter of 2023, a results of the identical rate of interest pressures skilled by its prospects, in addition to poor efficiency at its U.S. dealerships. Its new-vehicle gross sales quantity additionally declined, dropping to eight,771 models, 3.1 per cent decrease than the identical three-month interval a 12 months earlier.
But as new-car volumes dipped, the corporate’s used enterprise continued to broaden. It reported used-vehicles gross sales of 15,290 models for the primary quarter of 2023, up 8.7 per cent from the identical quarter a 12 months earlier, and never far off its document for 1 / 4, set in the course of the busier spring promoting season.
USED HELPS PROFITABILITY
The used-car focus has additionally helped AutoCanada increase profitability in F&I departments, and its elements, service and collision restore enterprise, Antony stated. Gross revenue throughout the two segments rose 5.8 and 19.7 per cent, respectively, in comparison with the identical quarter a 12 months earlier.
Among different steps to spice up profitability inside its used-vehicle gross sales wing, the corporate has prioritized lowering the period of time it takes to recondition stock.
In 2018, Antony stated the corporate took about 48 days to organize used stock on the market. In the newest quarter, that determine was between 27 and 28 days, serving to trim flooring plan financing prices. But reducing reconditioning timelines stays a work-in-progress, with the business common working between 10 and 14 days, he added.
An expanded partnership with on-line categorised website Kijiji.ca, which lists 1.4 million for-sale-by-owner automobiles on its platform annually, represents one other used-vehicle progress avenue, Antony stated.
The deal, introduced March 31, builds on a earlier relationship between the 2 firms, and can give AutoCanada the flexibility to market its F&I merchandise on automobiles bought on the platform, in addition to buy used automobiles from sellers on the location so as to add to its personal used-car stock, Antony stated May 4.
Despite prompts from monetary analysts on the earnings name, Antony divulged few different specifics of the Kijiji deal, however stated the corporate’s alternative with the net market is “of an exclusive nature.”
AutoCanada wouldn’t make Antony out there for an interview on the corporate’s used-vehicle enterprise.
While Canada’s solely publicly traded dealership group is more and more dialled into its used-, versus new-car operation, Antony stated these buyer relationships finally come full-circle.
“We’re positioning ourselves to sell volume and to sell used vehicles in order to drive business through our shops and dealerships that we think is more sustainable. And eventually, that used-car customer — if we treat them right and service them well — they end up becoming a new-car customer.”
Source: canada.autonews.com
