July 7, 2022

Market and Financial News

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After bottoming out early in the pandemic, U.S. car dealers’ profits are soaring.

2 min read

The last time the National Automobile Dealers Association was able to hold its annual convention in person, the mood was far different. In a word, grimmer.

Just before the pandemic, pessimism abounded among the nation’s almost 18,000 new-car dealers. Threats loomed for the traditional sales model — for more than a century, one of the great generators of localized American prosperity.

There was concern, too, about the inexorable advance of electric cars, with their higher price tags and presumed reduced service needs. Autonomous cars portended a drop in car ownership (and buying) with their promise of expanded ride-hailing and car-sharing.

Then the Covid-19 pandemic arrived in March 2020 to deliver a feared final blow. While the year opened with brisk showroom traffic, the bottom fell out, with auto sales diving to an annualized rate of 8.8 million that April, roughly half the normal clip. Dealers were rushing to the exit doors, looking to offload businesses that might suddenly be worth only the price of their underlying real estate, if that.

But the pandemic scrambled the economy in ways big and small, predictable and highly erratic. Jobs vanished, but rebounded fairly quickly. Online retailing advanced at a lightning pace. Supply chains grew messy and inflation just grew. And, for car dealers, the unexpected happened.

Sales recovered rapidly. And by the time the dealers gathered last month in Las Vegas for the 105th edition of their annual conference, they were ebullient, toasting at cocktail parties and stalking the convention floor. Vendors, with anything a car dealer could need or dream of, were armed with enough promotional tchotchkes to fill several gymnasiums.

There was much to celebrate. Instead of imploding in the pandemic, profits for carmakers and dealers alike exploded and kept soaring. While some brands reported lower sales, transaction prices rose sharply to make up for lost volume, allowing many makers to notch record profits, sales or both. And, lo…

Jamie Lincoln Kitman

2022-04-03 13:23:24

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