On this episode of Inside Automotive, host Jim Fitzpatrick is once again joined by Alan Haig, founder of Haig Partners, to discuss further developments in the car business.
Haig notes that dealership values have decreased roughly 10% since their peak in the first half of 2022. However, he notes that prices are still several times greater than the pre-COVID norm, and that even a 25% decline in profits over the course of 2023 would still place store values well-above average.
Haig notes that he has seen Toyota dealerships remain in high demand despite economic headwinds. “If we have a Toyota store, that is an average size and the client is willing to allow us to market it to a good number of potential buyers…it’s almost a feeding frenzy,” he explains.
The car business has also managed to retain its customer-first ideology, even in the face of economic headwinds. Tom Doll is the President and Chief Executive Officer for Subaru of America. Haig explains that he recently sat down with Doll at this year’s NADA convention, where the automotive leader emphasized the importance of recognizing dealers as retailers. “Dealer almost implies that there’s a transaction, there’s a give and take or a struggle,” he explains. However, since storefronts have such a high emphasis on customer service, the retail label is much more accurate. Vehicle retailers offer products based on the benefits and features which work the buyer. “And then once you own the product, [they help] take care of you and your family for a long time in terms of making sure it’s a reliable vehicle, and that the residual value is high,” he concludes.
Fixed ops also continues to be a major asset for retailers. Haig notes that automakers, especially truck brands, have issued so many recalls that service department profits continue to be strong even in the face of suppressed demand and reduced supply.
Despite these strengths, inventory continues to be a major headache for dealers, as OEM production continues to vary between brands. Some automakers have offered a slew of new vehicles to retailers, only for store owners to find out that all of the available models are in low demand. Others are still battling factory closures and supply chain disruptions, leaving their franchisees without product to sell.