AutoNation Reports New Vehicle Sales at ‘Recessionary Levels’

Retail sales of both new and used vehicles remain below historical levels due to inventory constraints, executives of automotive retailer AutoNation reported Thursday (Oct. 27) during the company’s quarterly earnings call.

During the quarter ended Sept. 30, the retailer’s new vehicle sales were down 5% and its used vehicle sales were down 3% year over year. Industry-wide, those figures were 4% and 11% respectively, the company said in an investor presentation released in conjunction with the call.

“Some parts of the industry are at really recessionary levels — which is our new vehicle volume,” AutoNation CEO Michael Manley said during the call.

Manley attributed this drop to continued supply chain problems and chip shortages.

At the same time, AutoNation earned higher average selling prices and record Customer Financial Services (CFS) gross profit per vehicle retailed that more than offset the lower unit sales of both new and used vehicles.

The company attributed the rise in CFS — which includes warranties, maintenance contracts and vehicle protection plans — to higher margins on protection products and increased product penetration.

Demand for auto repair was up as well, with year-over-year increases in customer pay, internal reconditioning and warranty work and 13% in overall after-sales gross profit.

“This remains a significant area for incremental revenue and margin, which has the potential to help offset new vehicle margin declines, should that happen, and obviously help buffer the group from some of the inevitable cyclicality the industry will face should we see a recession,” Manley said.

To meet the demands of today’s operating environment and drive cost efficiencies, AutoNation has also been leveraging its omnichannel capabilities.

“Over 50% of our unit sales originated on our digital channels for the quarter, and I think we’ve built and continue to build a compelling customer value proposition through the combination of our digital tools and our physical assets,” Manley said. “I think that’s critical, really, the combination of both of those things.”

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