Pitcher Partners has once again provided insights into the top three listed motor dealer groups and has explored how major trends, the macroeconomic environment and inventory supply has affected them in the 12 months ended 31 December 2024. 

The motor industry services team also has provided commentary on some of the major trends facing the market and how both retailer and importers will be affected.

The listed dealership groups Eagers Automotive (ASX: APE), Autosports Group (ASX: ASG), and Peter Warren Automotive Holdings (ASX: PWR) all saw revenue growth in CY24, up 13.6 per cent, 0.9 per cent, and 10.1 per cent respectively. 

However, the rising costs of running operations has added pressure on top of the impact of compressed margins caused by the oversupply of vehicles in the second half of 2024. 

Average inventory days’ supply increased across the board, rising from 61.1 to 69.7 days for APE, 65.1 to 82.8 days for ASG, and 76.5 to 79.5 days for PWR. 

Despite strong top-line growth, Net Profit Before Tax (“NPBT”) as a percentage of revenue reduced across all groups, with APE achieving 3.0 per cent (down from 4.3 per cent), ASG recording 2.0 per cent (down from 3.8 per cent), and PWR at 1.1 per cent (down from 3.1 per cent). 

With increased inventory aging and pressure on interest rates, the cost of carrying stock remains a key challenge heading into CY25.

Keith Thornton

CY24 has been another record-breaking year for new vehicle sales, building on the momentum of CY23, closing at 1,237,287 units sold (just shy of Pitcher Partners’ estimate of 1.25m units), a 1.7 per cent increase on CY23, according to VFacts. 

The first half of the year started strong, up 8.7 per cent, but the second half saw a clear slowdown. 

Starting in June 2024 sales declined by 4.2 per cent YOY, with overall volumes slowing down in subsequent months. The increased vehicle volume and increased vehicles MSRPs have been key growth drivers for listed dealer groups, supporting double-digit year-on-year revenue growth. 

However, profitability pressures continue to mount. Compressed front-end gross margins, rising expenses, and shifting market dynamics are forcing dealerships to double down on higher-margin products and services. 

Floorplan costs, advertising, employee compensation, and rent have all climbed, squeezing profit margins even further. As operating conditions bottom out, dealerships must return to fundamentals: disciplined cost control, operational efficiency, and a focus on profitable departments will be essential during tough market conditions. 

Interest rates remain elevated compared to the past decade, despite the Reserve Bank of Australia’s decision at its February 2025 meeting to decrease the cash rate by 0.25 percentage points to 4.1 per cent. 

While this marks a shift in monetary policy, finance costs remain high, continuing to impact affordability for consumers. Inflation has fallen substantially since its 2022 peak, with underlying inflation recorded at 3.2 per cent in the December quarter. 

This suggests inflationary pressures are easing more quickly than expected, aided by subdued private demand. With inflation now tracking closer to the RBA’s 2-3 per cent target range, there is growing confidence that price stability is being restored. 

This is before any impacts of the current trade and tariff ‘wars’ taking place since the inauguration of President Trump in the USA. Despite the market headwinds, Pitcher Partners now forecasts new vehicle sales of 1.1 million units in CY25 (after a subdued start), reflecting a decline from 2024 levels as demand normalises following the pandemic-era new vehicle sales volume highs.

The Good

Revenue growth 

Despite economic challenges, all three listed dealer groups (PWR, APE, and ASG) reported revenue growth, with a combined revenue increase of $1.99B AUD YOY, moving from $14.78B to $16.37B AUD, or up 10.8 per cent. This indicates that while profitability stays under pressure, demand is not timid. 

The not so good

Increasing the cost base cost of running a dealership has continued to climb across the board, with nearly every area of operation seeing increased expenses. 

These increases are compounded by inflationary pressures and higher input costs, which are eroding profitability. 

In 2024, the average listed dealer’s operating expenses reached $727.67 million, compared to $654.87 million in 2023, an increase of 11.1 per cent. And as a percentage of gross profit, operating expenses have risen from 71.62 per cent in 2023 to 77.15 per cent in 2024, marking a 7.72 per cent increase. 

As the cost of doing business continues to rise, it is becoming more challenging for dealerships to maintain margins, despite revenue continuing to grow. 

Inventory management challenges 

The automotive industry continues to grapple with inventory management, with oversupply becoming a real concern. While some dealerships have done well to manage inventory effectively, the broader trend of oversupply is concerning. This excess stock has led to increased bailment expenses and higher holding costs, which are eroding into profit margins. 

Overall, the average days’ supply of inventory for all three companies has risen to 77.3 days, up from 67.6 in CY23 (up 14.5 per cent YoY). 

Substantial increase in finance costs 

Interest expenses are becoming an ever-greater concern for dealerships, especially with the rise of higher inventory levels and recent historically high cash rate. In 2023, the average interest expense across the three listed was $71.5 million. 

This figure rose to $98.2 million in 2024 (up 37.3 per cent YoY), reflecting an increase of $26.7 million YoY. This surge in finance costs represents a significant drain on profitability, with the higher interest burden eroding profit by approximately $30 million across the average listed dealer.

The interesting 

The end of the national sales companies?

A market shift from NSC (national sales company) to distributor dominance will see the large retail groups dip their toe into distribution. 

• Australia’s fragmented market, that is 75+ brands selling just 1.2 million new units annually, cannot sustain its current structure. 

The rise of distributors (Eagers Automotive & BYD’s joint venture is an example) will streamline these brands offerings, ensuring models that suit local demand and benefit both dealers and consumers. 

• This shift will also elevate the importance of the used car market. No longer will a brand be able to sell ~10,000 units in Australia and employ hundreds of staff to do so. The economics haven’t stacked up for over a decade. The implementation of NVES and Chinese brand competition will force the hand of many brands to distribution. 

NVES: A political football and industry catalyst 

• The implementation of the National Vehicle Emissions Standards (NVES) will be clunky (it is run on an $80m spreadsheet) and caused a stir in the first quarter of CY25. 

• This will die down as the impact in year one is minimal, and the traditional OEMs will have loaded up on ICE stock to get them through the first half of CY26. However, NVES will be contentious during Australia’s May federal election. 

• The biggest impact of NVES will be the allocation of vehicles a dealer will be provided to sell. 

For example, OEM distributors may only allocate a limited number of high emissions vehicles to dealers that attract penalties once the penalties become significant in CY27. Despite customer demand, dealers will not receive any additional high emission vehicles to sell so that the OEM can achieve its emissions targets to avoid penalties.