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AutoCanada gives update on U.S. operations setup

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Market Trends
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Automotive dealership group AutoCanada shared during its Q4 earnings call that building up its U.S. market is 50% complete.

Board of Directors Executive Chairman Paul Antony shared last week that U.S. operations were restructured and new operating standards implemented in January. New operating standards included parts, service, collision repair, and sales best practices; inventory procurement, management processes, and F&I certification and training.

“These changes are expected to result in immediate cost savings and gradually bring the U.S. segment to sustainable profitability over the course of this year,” Antony said.

AutoCanada reported a 6.9% increase in total revenue during Q4 and full-year 2023, reaching record sales of $6.4 billion and a gross profit of $1.1 billion. Growth was primarily driven by new vehicle sales and a strong demand for parts, service, and collision repair, the company said.

“Consolidated parts, service, and collision repair experienced strong demand with same-store sales increasing by 10.2% and same-store parts, service, and collision repair gross profits increasing by 2.8%,” said Azim Lalani, AutoCanada CFO.

Antony added that AutoCanada has benefitted from the new and used car shortage over the last two to three years.

“We are able to charge more for our vehicles in the United States over MSRP, and we were basically taking orders on cars,” he said. “We actually built a team around selling vehicles with that model in mind. Now that supply is starting to return to more normalized levels, we had a bloated expense structure in the United States.

“But on the other side of that, we were not holding gross on our vehicles because prices are coming back more in line with what they should be and the market is much more competitive so you have higher operating expense, lower margin. Our job now is to increase the volumes in the United States, hold growth, and drop expense. There’s a bunch of different levers in the United States that will be pulled.”

Antony noted as well that while the collision repair branch of AutoCanada began as a startup, five years later it’s “turning into a real organization,” and although U.S. revenue generation is small right now, he said improvement will be seen soon.

“I am of the belief that this business is going to be profitable this year and even more so over the next year two years as long as they execute on the playbook that we’ve seen,” he said, of his U.S. team. “It makes me, frankly, excited for the U.S. opportunity. We had to retool the business once, it’s now being retooled again, but more in line with the Canadian operation.”

During the Q&A portion of the call, Antony was asked what his thoughts are on electric vehicles.

“I’m going to say exactly what I said a year ago and two years ago — electric vehicles are a solution [but] I don’t think they are the solution, especially right now,” he said.

He added that he thinks there is an “unnatural” government influence on OEM production of EVs. He was seemingly referring to President Joe Biden’s mandate for 60% of new vehicle production to be EVs by 2030. Antony said it’s driving irrational behavior by OEMs. Biden reportedly plans to push the mandate to after 2030.

The better solution, according to Antony, is plug-in hybrid vehicles to ease the public into getting used to vehicle charging and to allow for more time to build charging infrastructure.

“Over the course of the next seven to 10 years, they eventually say, ‘You know what, this is not that bad’ …it’s actually a disciplined growth curve upwards as opposed to telling everybody, ‘You’ve got to have an electric vehicle tomorrow,’ and there’s not enough power to power the system,” Antony said. “I think there’s a spot for internal combustion engines as well.”

EV pricing is also too high and creates a barrier to widespread adoption, he added.


Featured image: Stock photo of vehicles on a dealership lot. (Credit: deepblue4you/iStock)

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