Recent Mergers & Acquisitions Occurring in the Automotive Industry
The automotive industry is rapidly changing and prone to volatility, as it is subject to constant innovation and technological advancement. Despite this, it remains a cornerstone of our economy while contributing significantly to the GDP of many countries worldwide. One indicator of the car industry's positive growth is the substantial increase in profits, which have more than tripled compared to previous years.
However, despite these positive trends, the automotive industry remains challenging, with lower profit margins and higher expenses. Auto dealers must keep up with the latest developments and innovations to stay competitive. One such way that companies are achieving this is by buying car dealerships, with last year seeing over 500 dealerships involved in merger and acquisition deals. This year has been no different, with many dealerships making significant acquisitions to increase their market share and revenue.
This article will discuss the three recent mergers and acquisitions in the automotive industry that occurred last month, exploring their impact on the industry and their potential implications for the future.
1. Florida-Based Dealership Expands Its Reach Across the Midwest
The Ed Morse Automotive Group, a well-respected family-owned automotive dealer headquartered in Delray Beach, Florida, continues to expand its reach across the Midwest. In a strategic move, the Group recently acquired two dealerships from the Crowe Auto Group in the Henry County area of Illinois. This latest dealership acquisition follows the earlier purchase of dealerships in Muscatine and DeWitt, Iowa, located just 35 minutes from the newly acquired dealerships. These new dealerships are expected to expand the Group's growth potential and enhance its already established reputation for offering fair deals and excellent customer service.
Teddy Morse, the Ed Morse Automotive Group's Chairman and CEO, believes these acquisitions fit perfectly within their family-owned model and that these new dealerships will provide significant value to customers. The Ed Morse Automotive Group has been in business for 75 years and boasts 40 locations, 82 franchises, and 25 automotive and motorcycle brands. They have a longstanding reputation for excellence and a focus on customer satisfaction, which has contributed to its accomplishment of becoming one of the fastest-growing automotive and motorcycle dealer groups in the United States.
With its focus on providing exceptional customer service and great deals, the Automotive Group is well-positioned to continue its growth trajectory by acquiring dealerships. This latest acquisition is a significant step in its goal of becoming a powerful force in the industry.
2. Canadian Dealership Partners, PATH Auto Group, Acquires First U.S. Dealership
PATH Auto Group, a Canadian-owned car dealership, is making moves to expand its business into the United States. Founding partners Phil Alalouf and Todd Hewitt, formerly of the career dealership management sector, have purchased their first American dealership in the Coachella Valley of California. The location, previously owned by Nouri/Shaver Automotive Group, has sold over 700 new and used cars annually and is expected to retain its current name.
The move by PATH Auto Group follows a trend of Canadian buyers acquiring dealerships in the United States over the past several years. One of the main reasons for this expansion is the relative inaccessibility of affordable dealerships in Canada, which are often situated in remote locations. However, the Canadian company has no intention of becoming a vast operation, stating its modest goal of acquiring 3 to 5 additional car dealerships over the next five years.
The acquisition of Nouri/Shaver's California-based car dealership has mutually benefited both parties. PATH Auto Group acquired an affordable store with a proven sales track record. At the same time, Nouri/Shaver was able to exit a dealership that struggled to compete with their other, larger dealerships.
With this expansion into the United States, PATH Auto Group joins the ranks of Florida-based dealerships expanding their reach across the Midwest. This trend of regional development is expected to continue as dealerships seek to increase their market share and reach new customers.
3. The Largest New Car Seller in the Country Raises Revenue Goals for 2023
Lithia Motors, Inc, the largest seller of new cars in the United States, has announced an update to its revenue goals, aiming to reach an impressive $50 billion annual revenue by the close of 2025.
This goal is part of their comprehensive network development plan, which centers around acquiring dealerships, and has set a new target of $25 billion in revenue. Despite purchasing fewer dealerships this year than in 2021, Lithia is experiencing exceptional revenue growth, having hit 75% of their acquisition target revenue goals for the long-term plan, and reaching the halfway point towards their 2025 target.
With mergers and acquisitions being Lithia's core competency, the company has successfully purchased dealerships that generate billions in revenue, contributing to a wave of dealership consolidation throughout the industry.
Lithia's impressive 2021 investments have yielded an ROI of 30%, double their original target, and they show no signs of slowing down. The recent acquisition of Jardine Motors Group in the UK was one of many large deals that Lithia has completed, further consolidating the industry and establishing itself as a dominant force in the market. Lithia has more than doubled its revenue since 2019, from $12.67 billion to $28.23 billion, an impressive feat that speaks to its commitment to growth and expansion.
As they continue to surpass their revenue goals and expand their reach worldwide, there's no denying that Lithia Motors, Inc will remain a major player in the automotive industry in the coming months.
The automotive industry is constantly changing as automakers and dealerships seek new opportunities to expand their reach and grow their businesses. Over the past year, there has been a marked increase in car dealership mergers and acquisitions worldwide, resulting in significant market consolidation.
As larger dealerships like Ed Morse Automotive Group and PATH Auto Group expand into new markets, they continue to benefit from the increased demand for cars and the industry's consolidation. Meanwhile, Lithia Motors Inc has set ambitious goals and is well on its way to achieving them as it acquires more well-performing dealerships.
These three acquisitions paint a picture of an industry that is rapidly changing and adapting to the times, and it will be interesting to see what the future holds for these companies.