Earnings of U.S. auto dealers have eased over the past few months from record levels hit in 2022 as margins came under pressure from high interest rates and inflation, a report showed on Friday.
In 2022, profits reached an estimated $6.5 million per location for dealerships owned by public auto retailers, more than triple of pre-pandemic levels, according to the report from Haig Partners, a buy-sell advisory firm to auto dealers.
"We've polled owners of hundreds of dealerships over the past few weeks, and most expect profits will decline 10%-15% in 2023," said Alan Haig, president of the firm.
But dealers still expect profits to remain over twice as high as 2019, powering demand for acquisitions in the drive to expand, the report said.
"The result of high profits and strong demand is that we have seen record-high prices being paid for dealerships in the last six months," Haig said.
Last year, 566 dealerships were acquired.
Lithia Motors Inc , Asbury Automotive Group Inc and Sonic Automotive Inc have set lofty revenue goals to achieve by the end of 2025.
To hit those targets, the three auto dealers would together need $48.7 billion in revenue and purchases of nearly 500 dealerships, the report said.
The Haig Report tracks trends in auto retail. It is based on data gathered from public sources and interviews with leading dealer groups and dealers, bankers, lawyers, and accountants who specialize in auto retail. (Reporting by Kannaki Deka in Bengaluru; Editing by Devika Syamnath)
