IN THIS second segment of our two-part report we have cast our eyes across the Pacific to compare how the American listed retailers perform and examine how key industry trends, shifting economic conditions, and recent geopolitical events have shaped their results over the 12 months to 31 December 2024 and beyond.

In the first report we set out to help readers become familiar with these big American dealer groups which are showing an interest in the Australian market and, if current trends persist, one or more of them may well come to own a dealership near you.

In this report we look at the conditions in which these big US groups are operating at home.The good news

Revenue growth

Despite challenging economic conditions, the listed dealership groups experienced on average, 7.6 per cent YOY revenue growth, bringing the total revenue of the listed dealership groups to $144.8 billion. 

Four of the listed dealership groups reported increases in revenue YOY: Lithia Motors (16.6 per cent), Asbury Automotive (16.1 per cent), Group 1 Automotive (11.5 per cent), and Penske Automotive (3.1 per cent), primarily driven by dealership acquisitions in the US, Europe, and Australia.

The remaining two listed dealership groups have reported a slight drop in revenue YOY – AutoNation (-0.7 per cent), and Sonic Automotive (-1.0 per cent), mostly due to dealership divestitures, and lost productivity due to the CDK Cyber Incident in June 2024 (see below “Ransomware Attacks and Data Breaches are on the rise”).

Dealership acquisitions aside, there was also organic growth in new vehicle sales in 2024 for most of the listed dealership groups (increases ranged from 0.3 per cent – 4.0 per cent per SEC Filings). 

MarkLines said 16.5 million new vehicles were sold in the US in 2024, and 2025 vehicle sales is expected to be higher, despite inflation still being elevated (2.9 per cent in December 2024) and new vehicles still less affordable (the Cox Automotive Affordability Index indicates new vehicles are 11 per cent less affordable in 2024 than the historical average). 

From a brand perspective, Automotive News Q2 2024 data shows almost all brands sold in the US had increased sales in 2024 YOY except for a notable few (Stellantis, Audi, Volvo, Acura, Infiniti come to mind).

“The Great Normalisation” coming to an end?

US dealership profitability has been on the decline for the last two years from pandemic-era highs, though Q4 2024 data indicates that the decline in profits is slowing down. Per SEC filings, dealership profits had fallen quickly in the first three quarters of 2024 (27 per cent, 36 per cent, and 29 per cent from the corresponding quarters of 2023, respectively), however in Q4 2024, dealership profits were on average 6 per cent lower than Q4 2023. 

New and used vehicle gross per unit data also indicates a leveling off to pre-pandemic levels. Thus, US dealers appear to be at the tail end of “The Great Normalisation” and are more optimistic about future profitability in 2025.

The not so good

The return to pre-pandemic gross profits and an inflationary cost base has put dealers into a vice that is significantly impacting net profit margins. Dealers must focus not only on expense management but optimising operations to maximise gross in every department. 

Recent US dealer surveys indicate that the major profit drivers for 2025 will be parts and service, used vehicles and F&I, with a focus on using technology to make dealership processes more efficient.

Solution: dealers need a “cost out” strategy

To sustain or even enhance profits, cost control is not going to be enough, US dealers are going to need to take a hard look at cost structures and come up with a meaningful cost out strategy, a fact that Australian dealers have known for some time now. Dealers need to revisit all their processes to determine what doesn’t deliver value and eliminate them.

An example is the use of artificial intelligence (AI). Vendors have been selling solutions to dealers for a while now, walking the floor at NADA 2025, AI seemed to be everywhere. 

Products showcased mostly around lead management and some interesting solutions for inventory management focused on turning inventory faster by automating appraisals, assessing damage, and sourcing inventory. 

Substantial increase in floorplan costs

As mentioned above, dealership expenses continue to be a challenge, both variable and fixed costs alike, particularly, floorplan interest, which has soared from the previous year across the board. Per 2024 SEC filings, almost every listed dealership group cites increased level of vehicle inventory as the reason for the increase in floorplan interest expense and to a lesser extent rise in interest rates. 

With cash rates remaining high, the cost of holding stock is much higher than dealers are used to and will need to focus on improving their stock turn. According to Cox Automotive costs are getting worse with the average day’s supply in February 2025 at 96 days. Every day a vehicle sits on the floor more than it should, is a loss of profit.

Maya Sutanto

Ransomware attacks and data breaches are on the rise

Dealerships have always been prime targets for fraud with cybersecurity being one of the biggest threats to dealers for a few years now. Dealerships have valuable amounts of customer data, minimal IT safeguards, and multiple operational systems, which present an attractive opportunity for hackers.

The CDK Global ransomware attack that occurred in June 2024 was a wake-up call. 15,000 dealerships across North America were forced to revert to manual operations costing approximately $1bn and 5 per cent in lost new vehicle revenue according to J. D. Power and GlobalData. 

The system outage cost dealerships not only in lost productivity and reputational damage but additional floorplan interest in vehicles not sold as well.

Among the many lessons learned from this incident, what is highlighted is the risk to the business:

• Relying so heavily on a third-party service for critical financial and payroll functions
• Having outdated legacy systems using technologies that have not been upgraded for decades

These risks apply to all dealers globally, not just dealers that use CDK and not just dealers in the US.

Trump’s tariff war

The US automotive industry is in turmoil, with tariffs driving the market into uncertainty. On 1st February 2025, President Donald Trump reignited a trade war, leaving automakers and dealers caught in the crossfire. 

At the time of writing, the US has imposed a 25 per cent tariff on all automotive imports and a 145 per cent tariff on all imports from China.

In response, China has imposed a 125 per cent tariff on all imports from the US. The uncertainty is further exacerbated by the highly dynamic tariff negotiations where the rules are constantly changing. 

Already some major automakers have suspended vehicle imports into the US and overseas production, such as Volkswagen, Jaguar Land Rover, and Stellantis.

On top of automotive imports, automakers face higher tariffs on steel and aluminium, two critical raw materials for vehicle production. These rising costs will inevitably be passed down the supply chain, squeezing manufacturers, pressuring dealers, and ultimately landing on the consumers. 

However, some relief is expected now that the White House on 29th April 2025 provided some exemptions on tariffs on foreign vehicle and parts imports.

Through all this turbulence, one thing is certain: uncertainty itself is here to stay. Trump’s presidency was unpredictable in his previous term, and it looks as this is set to continue throughout his next term. 

For the auto industry, this means an environment where policies can shift overnight, supply chains can be disrupted at any moment, and long-term planning becomes increasingly difficult. 

Dealers must be prepared to navigate these shifting tides, adapting quickly to external pressures while maintaining their competitive edge. Dealers who can operate effectively in this volatile landscape will be the ones who thrive.

Economic outlook for 2025 – US recession likely

The uncertainty that has been injected into the US economy impacts both consumers and businesses. Businesses do not invest when uncertain and consumers do not buy when uncertain, which guarantees the economy will slow if not contract. 

That combined with rising unemployment, continuing elevated inflation, tumbling of consumer

confidence, and a slowdown in global growth, most economists now indicate a 40 per cent-50 per cent chance of a US recession with J.P. Morgan having raised their assessment to 60 per cent.

Future of US automotive manufacturing

President Donald Trump has been clear: if automakers want to avoid tariffs, they should simply move production to the US. The reality is that automakers are not rushing to shift production to US factories, despite the pressure from the White House. 

Ford CEO Jim Farley summed it up last month, calling the situation “a lot of cost and a lot of chaos.” 

Automakers are not about to rush opening plants in the US overnight, and those that are expanding their US presence, brands like Toyota, Honda, BMW, Mazda, Nissan, Hyundai, Volvo, and Lucid Motors are doing so for strategic business reasons, not just because of political pressure. 

Lower shipping costs, exchange rate stability, and market share growth are driving these decisions, not the sudden desire to manufacture with a “Made in America” label. 

Behind the headlines, however, the fundamental reality remains unchanged. Manufacturing in the US can be significantly more expensive than in other countries, and for most automakers, the cost-benefit analysis does not justify a rapid shift.