During the Q&A portion of Penske Automotive Group’s latest quarterly earnings call, chairman Rogers Penske was asked if his viewpoint on CarShop and CarSense had changed since the dealer group purchased the respective used-car standalone retailers.
“Yeah, it’s changed. I like it more,” Penske said with a laugh.
“I think we’re very fortunate to get into this business,” he said. “The technology, the people. We’ve had no turnover with senior management. Both of these businesses, I think they applaud the fact we’ve come in with capital, with ideas, with an expansion mode offense.”
Fortunate and prudent, perhaps.
Quarterly numbers, expansion plans
In the third quarter, Penske Automotive’s standalone used-car businesses — which include CarSense in the U.S. and CarShop in the U.K — retailed 11,626 units.
Year-to-date, which includes results since acquisition, the standalone platforms have retailed 30,952 used units.
Quarterly revenue from the standalone stores in Q3 approached $200 million, while year-to-date revenue was at $535.7 million.
Gross profit per unit retail was at $1,152 in the quarter, with the year-to-date figure at $1,222.
F&I gross profit per unit on these sales were $1,188 in Q3 and $1,182 year-to-date, putting the total variable gross profit per unit at $2,340 and $2,404, respectively.
“We believe these used-vehicle dealerships further diversify our business and provide an opportunity to capitalize on a highly fragmented used-vehicle marketplace. We also believe these businesses provide an unlimited white space for scalable expansion,” Penske said during the call. “We’ve identified several new markets for expansion of the CarSense and CarShop brands and are on track to double those number of locations within 24 months of the initial purchase.”
The group announced in early January it had signed an agreement to buy CarShop, a chain of five standalone used-car retail stores in the U.K. That deal ultimately closed in February. Penske announced the purchase of US-based CarSense in December, then closed that purchase in January.
There are likely to be a handful or more of expansions from these two platforms.
In the U.S. in particular, CarSense will likely be “growing off that base” in Pennsylvania and New Jersey.
“The interesting thing is, when you look at those two businesses, take all the inventory out, probably the total net-book value of the fixed assets is probably around $5 or $6 million,” he said. “So we don’t have tens of millions of dollars of fixed assets … we have cash and we have cars and we have profit.”
Penske’s goal is to take what its learning from those standalone stores and see if it can be utilized in the retailer’s traditional business. However, the goal is not — or does not appear to be — to compete with CarMax.
Brushing aside any comparison to CarMax, Penske said that used-car giant exists in a “zip code that we’re not in.”
Penske’s goal, rather, is to go into areas that can be scalable for the company, where it has employees, and so forth.
“What we’re trying to do is look at areas that we can go into, where we have scale and we have people that we could transfer from the traditional business into this business as we expand,” he said. “I’m very confident that we’ll see at least six, either through acquisition or new-store openings, take place in our two businesses next year.”
These standalone stores, of course, aren’t the only used-car projects on Penske’s radar.
Fair, an app that provides used-car leasing to consumers on a flexible basis, announced on Oct. 20 that it was closing a BMW i Ventures-led strategic funding round that also includes investments from Penske Automotive Group, among other strategic investors.
In a news release, Fair founder and chief executive officer Scott Painter said the company will utilize Penske’s physical infrastructure.
In the same release, Penske president Robert Kurnick said: “Penske is committed to be on the leading edge of technology, and our investment with Fair reflects that commitment. The potential appeal of the Fair app to consumers is compelling while keeping our company at the forefront of bringing mobility solutions to the marketplace.”
During the quarterly call, Roger Penske also discussed the Fair investment.
“We’ve invested $1.2 million, less than 1-percent ownership. We think this is an interesting startup,” he said. “You’re seeing GM and Ford and all these other people investing in some of these different business ventures and ideas, so we’re going to learn from this one and see if there’s any way that this might have an application to us at this particular time.”
Penske added that the company is exploring making $1 million to $5 million investments in similar projects like ride-sharing over the next 12 months.