Automotive Retailers Hopeful Following Huge Q2 Rebound – RVBusiness

Automotive Retailers Hopeful Following Huge Q2 Rebound – RVBusiness


Matt Bowers’ Southern United Auto Group had record results in June. And July was even better, according to a report by Automotive News.

“We lit it up,” said Bowers, president of the growing dealership group with six stores in Louisiana, Alabama and Tennessee.

Pent-up demand, expense cuts and Paycheck Protection Program money, plus automaker support and temporary relief from lenders and vendors, helped many dealers turn a profit in the second quarter — some even boasting earnings records.

It is a far cry from the financial bloodbath many feared in late March as the coronavirus pandemic stifled consumer demand and led to government stay-at-home orders and closed showrooms. Sonic Automotive Inc. CEO David Smith in April predicted the second quarter would be the worst in the dealership group’s history.

Instead, the sixth-largest U.S. new-vehicle retailer saw sequentially stronger results over the three months. Higher new-vehicle margins aided by inventory shortages, increased used-vehicle sales and strong finance and insurance performance, along with big cost cuts, helped Sonic post higher net income than a year ago.

All six public dealership groups ended up profitable for the quarter, with Lithia Motors Inc. and AutoNation Inc. both posting adjusted earnings records.

Sonic’s turnaround ignited as government shutdowns loosened, Smith said. David Hult, CEO of Asbury Automotive Group Inc., said closing nonessential businesses in many states and the subsequent decline in consumer spending on entertainment and travel may have contributed to the stronger-than-expected second quarter.

“People aren’t spending money on vacations and plane tickets and bowling alleys. They’re spending more money on vehicles; down payments are getting bigger,” Hult said.

The public retailers, which weren’t eligible for the forgivable PPP loans, furloughed thousands of employees and terminated more as the crisis unfolded. Like many private dealers, they also significantly reduced capital expenditures, halted facility projects and slashed advertising budgets. Some of the moves are permanent and are expected to help financial results going forward. But virus-related risks remain, and it’s unclear just how strong the rest of the year will be financially.

“You’ve got to worry about the flare-ups or outbreaks in certain pockets of the country that cause people to go back inside and stop spending money,” National Automobile Dealers Association Chief Economist Patrick Manzi said. “That’s going to be one of the biggest issues, not just for auto retail but for the economy in general.”

Click here to read the full report.

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