Haig Partners

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New Vehicle Sales Reach Post-Pandemic Highs: What This Means for Dealership Owners and Valuations New data from Cox Automotive Inc. reveals that new vehicle sales have reached their highest monthly rate since the pandemic, with November's Seasonally Adjusted Annual Rate (SAAR) hitting 16.5 million. This marks the highest SAAR since May 2021, which had a monthly SAAR of 17.0 million. This resurgence signals that the improvements in new vehicle affordability, as highlighted in our Q3 2024 Haig Report®, are finally translating into higher sales volumes—a development that has significant implications for dealership values. https://hubs.la/Q030fWNC0

A Story of Family, Vision, and Growth: The Journey of Brothers and the Sale of Two Toyota Dealerships in West Virginia Shawn and David Ball are living proof that the American Dream thrives in the auto retail industry. The journey of these two brothers began with humble origins. Shawn started his career washing and transporting vehicles for a used car wholesaler before venturing into the used vehicle wholesale business. After years of hard work and frugality, Shawn acquired L&S Toyota, transforming it into a highly profitable operation. This success laid the groundwork for acquiring Advantage Toyota, which he co-owned with his older brother David. David Ball, who transitioned from a decade in the coal mines to the auto retail business, played a pivotal role in making Advantage Toyota the highest-volume dealership in the region. Later, Shawn took on the challenge of revitalizing Toyota of Charleston, now Victory Toyota of Charleston. Today, David enjoys a well-deserved retirement, while Shawn continues to lead L&S Toyota, a dealership he envisions passing down to the next generation. Read more about Shawn and David and their journey: https://hubs.la/Q0300Pb00

In case you missed in last week's Automotive News: Sales Per Dealership Have Changed Significantly: Here is a 5-year lookback on unit change in average new car sales per dealership. Dealership Profits Continue to Fall: The decline in earnings has slowed in Q3 from the first two quarters of 2024 (see charts attached). We hope the profit decline levels out over the next two quarters or so, and perhaps we can regain profit growth. Dealership Valuations are Evolving: Some franchises enjoy profits near record highs, so their values remain near record high levels. Other brands have fallen much further in financial performance over the past year. Estimated Average Blue Sky Value Per Dealership: The Q3 average blue sky value is a 12% reduction from the end of 2023, which we now perceive as the market's peak. Average earnings remain well elevated from pre-pandemic times, and the demand from private buyers remains strong. Read more: https://lnkd.in/gbYs9CJr

In addition to current auto retail trends, Alan Haig discussed how dealerships are being valued. At Bank of America's Auto Dealer Day, he shared in part, "We see a lot of cash out there, and dealers want to put it to work in a store near their current business and/or one that their children might want to operate. So, we are seeing the demand for these dealerships to be as high as they have ever been, even though the values are slightly slower because earnings have come down. So, we do not even know. It is not looking at the profits in 2020, 2021, 2022 or even 2023. It is what they are making now. And then if you look at 2019 – that is the disaster case. That is how we think many buyers are doing the math in their heads today. It is not a sophisticated IRR analysis, as some of us are used to learning from our business classes. Rather, in many cases, it is a gut feeling these dealers have when valuing stores." Thank you, John Murphy, and the team at Bank of America, for another great event. https://hubs.la/Q02_hnn_0

Since the peak year for dealership profits, 2022, average pre-tax income at publicly owned dealerships has fallen by 35.5%. These numbers may sound terrible, but Q3 average profits per store were still 100% higher than in Q3 2019 before the pandemic began to take effect.

Public company divestitures are a normal part of portfolio management. They are healthy for both the public retailers and the stores involved. Over time some stores may no longer fit a company's strategy and can flourish under different ownership, leading to better overall performance for both the public retailer and the individual store. https://hubs.la/Q02-WQH-0

Is It Still a Good Time to Sell Your Dealership? Here’s What You Need to Know. Blue Sky Values: Elevated but Declining The average blue sky value—a key metric reflecting the goodwill value of dealerships—was $21.3M in Q3 2024. That’s a 12% drop from the all-time high in 2023, but still significantly above pre-pandemic levels. Here’s what’s driving the market: > Values dipped just 2% between Q2 and Q3 2024, indicating a more gradual shift. > Private buyers are keeping values competitive, even amid cooling conditions. > Toyota and Honda dealerships remain resilient, while others like Nissan have seen steeper drops in profitability and value. Why This Market Still Matters - The market peak of 2023 may be behind us, but that doesn’t mean opportunity has vanished. Consider: --> Goodwill values for most brands are still twice as high as pre-pandemic levels. --> High-performing franchises like Toyota and Lexus have retained much of their value. If you’ve been considering a sale, there are still significant opportunities—especially for owners of strong-performing dealerships https://hubs.la/Q02-P52k0 Source: The Q3 2024 Haig Report®

We are proud to share that Alan Haig, the founder of Haig Partners, has been invited once again to speak at the exclusive Bank of America Auto Dealer Day, hosted by John Murphy. It’s an honor to continue to contribute to this event, which brings together some of the the best minds in the automotive retail industry to exchange knowledge and look toward the future. Alan will be diving into key topics, including: > Trends driving dealership values in today’s market > What’s ahead for dealership valuations and buy-sells in 2025 > Strategies for navigating economic headwinds and opportunities https://hubs.la/Q02-y4Tf0 #DealershipValues #BuySellMarket #AutomotiveRetail #Leadership #BOADealerDay #HaigPartners #FutureFocused

Hear directly from our clients! Beyer Automotive Group’s success story is a testament to what partnership and expertise can achieve. Read more about Mike Beyer and his family's journey growing a prominent dealership group in Virginia and the decision to transition on to other interests and more focused time with family. https://hubs.la/Q02-pwFd0