A Sonic Automotive dealership showroom
As high demand and low new-car inventories drive record high prices across the U.S. auto industry, dealership group Sonic Automotive reported record third quarter revenues of $3.1 billion, a 20.6% increase vs. a year ago, and net income of $84.5 million for the quarter, up 41.2%,
“Consumer demand is still very, very strong,” said Sonic Automotive CEO David Smith, in a phone interview on Oct. 28, following a conference call to announce third-quarter earnings.
“Our new-vehicle days-supply is at an all-time low. The demand for new vehicles is at an all-time high, and we’re at an all-time record gross profit per vehicle, in our new-vehicle sales,” he said.
Smith said in the earnings call that Sonic’s 84 franchised, new-car dealerships had a record low of only around 2,400 new cars and trucks in inventory, representing a 10-day supply at the current sales rate. A year ago, inventory was around 13,000 units.
Used vehicle supply for franchised dealerships was about 8,200 units, or a 27-day supply, which Smith said was in line with Sonic’s target for used-vehicle inventory. That’s not counting inventory for Sonic’s EchoPark used-car-only locations, which had a used-vehicle inventory of 9,800 units, or a 41-day supply.
Jeff Dyke, president of Sonic Automotive, said he thinks low inventories may be bottoming out, followed by a slow recovery. In addition to a computer chip shortage, he said there are disruptions to the supply chain for other components, as well as a labor shortage, which all contribute to inventory problems.
“We’re not going to get any lower than the eight, nine, 10 days’ supply. That starts moving back north as we move forward from here, but it’s going to be slow,” Dyke said. Inventory is likely to continue to be a problem through the first half of 2022, he said.
As a result, for Sonic’s franchised dealerships, the average new-vehicle gross profit per unit was $5,051. That’s nearly double what it was a year ago, and more than double the third quarter of 2019, pre-COVID, the company said.
The conference call was Sonic’s first quarterly report since it announced a $700 million deal last month, to acquire RFJ Auto Partners, a privately owned dealer group based in Plano, Texas, with 33 dealerships in seven states.
Sonic expects the acquisition to close in December. The former RFJ dealerships would add an estimated $3.2 billion in annual revenues. It would also introduce Sonic Automotive, based in Charlotte, N.C., into six new states: Washington, Idaho, Montana, Indiana, Missouri, and New Mexico.
