Public Dealership Groups Break Fixed Ops Records

Now that consumers keep their cars longer, parts and service are in greater demand.

Jim Henry, Contributor

August 4, 2023

4 Min Read
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Penske leads public auto groups in second-quarter parts and service revenue.Penske Automotive

The six largest publicly traded dealership chains report $3.9 billion in parts and service revenue in the second quarter, up 8.2% vs. a year ago. For the first half, parts and service revenue for the group was $7.7 billion, up 9.1%. That offset declines in gross profits from new and used vehicles.

Demand is strong for parts and service, especially as many consumers keep their vehicles longer to avoid high new-vehicle prices, he says.

As we previously reported, AutoNation CEO Mike Manley said three factors support his group’s success in parts and service: a large pool of existing customers who are already familiar with the AutoNation brand, large capacity in the form of service bays and technicians and customers keeping and servicing their vehicles longer.

AutoNation reported same-store parts and service revenue of $1.1 billion for the quarter, up 9.1% vs. a year ago.

Here's how the other companies fared:

Lithia Report

COO Chris Holzshu of Lithia & Driveway Motors, Inc. makes similar remarks in a separate earnings call.

“With the average age of vehicles rising, coupled with the increasing complexity of new vehicles, our team of certified, factory-trained technicians are working hard to deliver on the massive demand for services from our customers,” he says.

Lithia, based in Medford, OR., reports $702 million in service, body and parts revenue in the second quarter, up 5.8% vs. the same quarter a year. Revenue numbers cited in this story are on a same-store basis.

Holzshu says work paid for by customers (vs. warranty work) accounts for 57% of Lithia’s parts and service business, up 6.1% for the first quarter. Warranty work was up 11%, he says. The remainder of the revenue is from sales, F&I products and other sales.

New and used vehicles are producing lower gross profits. So, service, body and parts contribute more to Lithia’s gross profits overall: 31.9% of total gross profits, up from 26.9% a year ago. The other public groups show a similar pattern, with a more significant gross-profit contribution from parts and service.

Of the six publicly traded dealership groups, Lithia had the smallest percentage increase in parts and service revenue for the quarter. Penske Automotive Group, Bloomfield Hill, MI, has the largest of the six groups.

Penske Report

Penske Automotive’s second-quarter retail parts and service revenue was up 10.7% to $653 million. That total includes U.K. operations but not Penske’s considerable commercial truck operations, the company says.

Roger Penske, chair and CEO of Penske Automotive Group, says customer-pay work was up 10% for the quarter; warranty, up 13%; collision repair, up 14%. “Many of our operations experienced record months in service and parts during the quarter,” Penske says in a conference call.

Group 1 and Sonic Automotive Report

Meanwhile, Group 1 Automotive says that as of the second quarter, it has had nine consecutive quarters of record parts and service revenue, which it calls after-sales revenue.

In a separate call, Kenningham of Group 1 Auto says that after acquisitions, his group consistently finds that the former dealership owners have under-invested in parts and service. “That is the first place we invest, whether it’s capacity, equipment, staffing (or) training, and we do that as quickly as possible with all the new acquisitions,” he says.

“We continue to invest in aftersales and believe parts and service will be a strength through the rest of 2023,” Kenningham says.

Sonic Automotive Inc., Charlotte, NC, says its revenue for parts and service and collision repair for its franchised dealerships was up 8.9% for the second quarter, to $433.4 million.

“We’re full – every stall,” says Jeff Dyke, president of Sonic Automotive. “We need more stalls; we need more techs. There’s no question about that.”

Asbury Automotive Group Report

Asbury Automotive Group, Duluth, GA, reports a 6.2% increase in parts and service revenue to $525.3 million for the quarter. Asbury says it would have done better, but getting some acquired dealerships switched over to a new dealer management system disrupted some operations.

“We almost doubled the company within 30 days,” starting in late 2021, says David Hult, Asbury president and CEO. “That was a significant-size impact to our company as a whole. So, there’s a lot of transition that we’re going through.”

The most significant part of that size increase is the December 2021 acquisition of the Larry H. Miller dealership group, including 54 new-vehicle dealerships, seven used-vehicle dealerships, 11 collision centers and its in-house F&I products provider, Total Care Auto.

Hult says Asbury initially held off fully integrating parts and service operations for the Larry H. Miller dealerships and some other acquisitions.

“This is the year that we chose to really tackle that. So, our folks out there are probably frustrated with us a little bit with some of the changes in the implementation of software. But once everyone gets used to it, we think we’ll be at a much better place and more efficient out there, like our legacy stores are,” he says.

 

 

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