Houston-based Group 1 Automotive is one of the largest retail chains for new vehicles in the United States.
“Demand is very strong,” he said in announcing first-quarter earnings on an April 27 conference call. “We sell most of our products almost immediately after the manufacturer delivers.”
Thomas King, president of JD Power’s data and analytics division, said at a recent New York Auto Forum that 2022 will be “without question the most profitable year ever for retail dealers.”
The forum is hosted by JD Power, the National Automobile Dealers Association, the Greater New York Automobile Dealers Association and the New York International Auto Show.
For example, Group 1 said that gross profit per retail unit for new vehicles more than doubled to an average of $5,479 in the first quarter compared to the first quarter of 2021. Same-store new vehicle sales fell 14.2%. Total Group 1 revenue rose 11% to $3.2 billion, as did same-store revenue.
Most automakers in the U.S. market report vehicle sales only once a quarter. For those automakers that do provide monthly sales figures, those reports are due May 3, according to Motor Intelligence.
Forecasters expect April 2022 sales to drop by around 20% compared to April 2021, but that’s because new cars are in short supply relative to high demand, not because of a lack of demand. The resulting record transaction prices so far don’t appear to have disappointed customers, dealers said.
In addition to a shortage of new vehicles, a shift in consumer preference to SUVs, crossovers and pickups also pushed up average prices. On average, trucks are larger and more expensive than passenger cars.
High prices may one day kill demand, but it’s still a distant threat for most new-car buyers, who have good credit histories, Hesterberg said. Affordability is, logically, a bigger hurdle for buyers with the highest subprime credit risk — especially if interest rates rise, he said.
“It’s a very price-sensitive, interest-sensitive market, but we’re not really into that market,” Hesterberger said.