Dealerships are leaving money on the table as the auto retail business shifts in areas, from product rollouts to dealer acquisitions—according to veteran industry analyst John Murphy.
Murphy, recently named managing director of strategic advisory at Haig Partners after his time at Bank of America, spotlighted several underleveraged profit centers in a conversation with Daily Dealer Live hosts Sam D’Arc and Yossi Levi.
Facing the challenge: One major challenge: product cadence. Murphy noted that both this year and next will see historically low levels of vehicle launches, with only 29 new models set for release in 2025.
“A lot of companies (have) been waylaid by the EV investments…and kind of have been canceling a lot of those and pushing those out,” he said. “So, that’s part of the big problem. But some of the brands that are struggling on product development are Nissan, Stellantis—the obvious ones…Everybody's got a little low over the next couple of years.”
Seizing the moment: Still, brands currently underperforming—such as those under the Stellantis umbrella, along with Ford and GM due to EV challenges—could offer high-return opportunities for strategic investors, Murphy said.
“If you invest in a bad company and the multiple is very cheap and hopefully there will be turnaround by the management over time, you might get, ultimately, the best return over time,” explained Murphy. “But if you're paying a very high multiple for a good company, that good company might not be able to get much better over time. So, the multiple won’t expand, and you want to make that much money on that investment.”
For OEMs facing mounting challenges, there's also a stronger incentive to invest in deeper dealer relationships—particularly among Stellantis $STLA ( ▼ 0.61% ), Ford $F ( ▼ 1.67% ), and GM $GM ( ▼ 0.34% ), Murphy added.
Another untapped opportunity: the aftermarket. Dealerships are only capturing around 40% of the parts and service business on vehicles they originally sold, Murphy pointed out.
“Dealers capture $55 to $60 billion of the profit off of vehicles in their lifetime,” he said. “On an annual basis, there's about another $135 billion that goes away from these dealers.”
Bottom line: Capturing that lost revenue hinges on better collaboration between dealers and automakers, Murphy emphasized. With 17,500 to 18,000 rooftops nationwide, he noted, there’s a “finite supply of points generating great profits”—a fact that hasn’t gone unnoticed by family offices and private equity firms, which are increasingly eyeing acquisitions as aging dealer principals look to exit.
Editor's Note: This article features an interview with a Haig Partners employee. Haig Partners is an advertising partner of CDG News and has advertising content within this article. The editorial content and interview were conducted independently and were not sponsored or influenced by Haig Partners' advertising relationship with CDG News.
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