FOR a number of years Pitcher Partners has been reviewing the performance of Australia’s publicly-listed auto retailers.  In this two-part report we 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.

It may also prove fruitful to become familiar with these big 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.

The American auto industry

The US and Australian markets are similar in many ways (e.g. consumer preferences), however there are significant differences as well, the most obvious one is size, and less obvious, competition.

In 2024, 16.5 million new vehicles were sold in the US (across 55 brands) compared to 1.2 million new vehicles sold in Australia (across 68 brands), the top 10 brands in Australia and the US are as follows:

On top of that, there are 14 Chinese-branded automakers in Australia, one of which is BYD which has quickly dominated as a global leader in the car market but the Chinese brands have yet to enter the US market. 

All in all, the Australian market is significantly more competitive than the US market and has been for some time.

According to SEC filings, the US listed dealership groups represent approximately 8% of the US new vehicle market while the largest 150 dealer groups (including the listed dealers) as reported by Automotive News represents approximately 25% of the new car market. 

The three Australian listed dealers represent approximately 21% of the new car market (IBISWorld Motor Vehicle Dealers in Australia, December 2024). 

The US listed dealers can be summarised as follows:

Listed US dealer group results summary

The average revenue growth for these players was 7.6% YOY which was mostly driven by dealership acquisitions, though all dealership groups reported some organic growth

in new vehicle sales as well as parts and service. 

All entities reported a reduction in gross margin (ranging from 0.2% to 1.5%), combined with the rising cost of running operations has added pressure to the bottom line. 

Reduction in new vehicle gross is mostly due to excess supply of new car stock (Average Inventory Days has increased by 18.2% YOY). As a result, average NPBT as a % of Total Revenue now sits at 3.2%, down 1.1% YOY. 

US dealership profitability has been on a decline since the end of the pandemic as vehicle availability has recovered and inventory levels have built up, although according to Q4 2024 SEC filings there is a slowdown in declining profits.

One of the key causes of declining dealership profitability has been the increased cost of carrying stock due to inventory sitting longer and rise of interest rates. 

According to MarkLinesdata, US vehicle sales reached 16.5 million units in 2024, up 2.1% from 16.1 million units in 2023. This continues the industry’s recovery from the supply-constrained lows of 2022, and the higher inventory levels and rising vehicle prices are what is behind the organic growth in vehicle sales for the listed dealership groups. 

Inventory levels have more than doubled since the lows of 2022, while the average listing price has increased by 29.1% over the past four years, according to Cars Commerce.Another significant hit to US dealer profits was the lost productivity and related costs from the CDK Cyber Incident in June 2024, which impacted over 15,000 dealers with losses estimated to be over $1 billion. Many of the listed dealership groups cited the ransomware attack as a reason for a decline in revenue and/or profitability in 2024 SEC filings.

Other than the CDK Cyber Incident, Australian dealers are familiar with the profitability pressures that US listed dealership groups are experiencing though they feel more pain, particularly when it comes to property and people.

Due to differences in the property market, tax and other legislation, and labour laws, Australian dealers have seen significantly higher increases in property and people costs as a percentage of sales than US dealers. 

Another significant difference is the income generated from F&I products, there are

significantly more restrictions on Australian dealers than US dealers because of the 2019 ASIC review.

Maya Sutanto

Thus, one would expect the US listed dealers to earn a higher NPBT on average compared to the Australian listed dealers (3.2% compared to 2.0%). What is similar though, is the fact that profitability is trending down, thus, the call to focus on higher-margin products and services as well as an effective cost out strategy applies to both Australian and US dealers alike.

Outlook

The 2025 outlook for the US economy appears to be different to that of Australia. Between the global trade war, supply chain disruptions, slide in business sentiment, and  increased uncertainty of both consumers and businesses, economists predict a US recession is now more likely (up to 60% probability). 

On top of that, borrowing costs and inflation are still elevated, and affordability pressures are weighing on discretionary spending, including vehicle purchases. It is noted, if the US and China are pushed into a recession, a global recession is also likely.

Another difference to highlight is the trajectory of the US and Australian auto market. US new vehicle sales peaked in 2016 after a sharp V-shaped recovery from the 2008 GFC lows. 

Since then, volumes have fluctuated, with a drop during the pandemic, followed by a gradual recovery that is still ongoing. SAAR for 2025 is 16.3 million units as of February 2025 (“Seasonally Adjusted Annual Rate” is a key metric used to project full-year car sales in the US using monthly data). 

Australia, on the other hand, has seen more consistent growth. While volumes dipped during the 2020 pandemic, the market rebounded quickly and has since set new records, surpassing 1.2 million units in both 2023 and 2024. Industry sources (including Pitcher Partners) forecast 1.1 million units will be sold in Australia for 2025.

The trajectories of the two car markets may be different due to varying economic conditions, industry structures, and government policies, however US and Australian dealers have always faced the same challenge which is the need to adapt in volatile times.