AutoNation Puts Used Supply Solutions into Play; Says to Expect 'Better' Used-Car Performance


FORT LAUDERDALE, Fla. - 

During Thursday’s conference call with investors, AutoNation’s management didn’t dispute the notion that its used-vehicle performance relative to the overall industry was stronger in the first half of 2012 than it was in the second.

The company also didn’t shy away from acknowledging what appears to be a “shift from used to new.”

But it seems the impetus has largely been low used supply, and AutoNation emphasized how the company has been proactive in tackling the supply challenge.  

In fact, president and chief operating officer Mike Maroone illustrated the steps AutoNation has taken to shore up used inventories and said “you can look forward to a better performance from us” in the used-car market this year.

“We are working really hard on the supply side. I think you can expect better results with us going forward. We are actually working harder to retain more of our trades and have made some structural changes in the first of the year that our team is very bought into,” Maroone said during the call.

“We are working really hard on developing some out-of-store capabilities. For example, we’re now buying cars online through a very interesting process using some big sources like Edmunds and eBay, taking trades,” he continued. “We’re taking trades for Tesla. So we’re trying to develop the capabilities to go beyond store sourcing and source in other ways. And I think that, again, under a common brand name, it will become even easier, and we are making incremental investments in that part of the business.”

Maroone was referring to the new branding strategy announced Thursday, in which all 210 franchises that fall under the company’s domestic and import business segments will be marketed under the AutoNation brand.

The transition, which began Friday in South Florida, involves 23 brands.  AutoNation aims to have it complete throughout all markets by end of the second quarter.

Delving into some used-car specifics,  AutoNation moved 180,973 used retail units in 2012, good for a 5.8-percent increase from the 171,094 used sales it recorded in 2011.

Used revenue for the year came in at $3.71 billion, compared to $3.51 billion a year ago. This was part of overall 2012 revenue for AutoNation that reached $15.67 billion, and record adjusted earnings per share from continuing operations of $2.54.

More on Used Supply Challenges

When asked by an analyst about what appears to be a downward trend in the used-to-new ratio, Maroone said he believes there has been a “shift” toward new cars, though there is some variance. He went on to look at how used supply has impacted these trends.

“I think there certainly is a shift from used to new. I think it varies by quarter and by what’s being offered to the consumer,” he said. “On the used side, the primary issue is supply. The mileage of our trade-ins continues to elevate; it’s gone up each of the last two years, as people have held off (making purchases), so we’re seeing a lot of high-mileage trades; some that can be retailed, some that cannot.

“We also have a limited number of vehicles coming off lease; that really goes back to the disruption in ’08 and ’09. I think the used-car business, over time, will be back,” Maroone continued.

“But if I look at both new and used together, we’re up (approximately) 12 percent on a total-store (basis), 11 percent on a same-store (basis), so we’re pleased with the business. Certainly I think on a go-forward basis, as there is more supply available, I think the used-vehicle business will get better for the industry and for AutoNation.”
 

Joe Overby can be reached at joverby@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.

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