Penske Automotive Group Inc. is pausing on its purpose to have its standalone used-vehicle CarShop places promote 150,000 automobiles yearly by the tip of 2023, because it offers with greater prices of gross sales and automobile acquisition woes.

Penske introduced in February 2021 that it deliberate to broaden its CarShop places within the U.S. and U.Ok. to 40 by the tip of 2023, up from 17 on the time, and practically triple the unit’s annual gross sales to 150,000 throughout the identical interval. It additionally aimed for the CarShop enterprise by that point to generate annual income of between $2.5 billion and $3 billion and pretax earnings of about $100 million.

However the business’s automobile scarcity and elevated competitors to supply used vehicles has disrupted Penske’s capability to succeed in these objectives. CarShop automobile gross sales of 110,000 could also be extra practical for 2023, CEO Roger Penske informed Automotive Information final month.

“Acquisition pricing is considerably greater, [and] our value of sale is greater, which is placing strain on margins,” Penske stated.

Penske informed analysts in April that new-vehicle provide shortages have damage used-vehicle affordability, and wholesale costs have continued to extend. In some instances, pricing on a 1- to 3-year-old used automobile is close to or above the value of a comparable new automobile, Penske famous.

“We stay optimistic concerning the CarShop mannequin,” he stated. “We’ll proceed to develop CarShop primarily based on the flexibility to obtain reasonably priced automobiles, which can impression our purpose of retailing 150,000 by the tip of ’23, clearly reflecting our present market situations.”

Public rivals AutoNation Inc. and Sonic Automotive Inc. even have bullish plans to broaden standalone used-vehicle facilities by way of their respective AutoNation USA and EchoPark items. For instance, AutoNation goals to have greater than 130 used-only shops by the tip of 2026, up from 11 at present.

Penske opened six CarShop places final yr — two within the U.S. and 4 within the U.Ok. On the finish of the primary quarter, Penske had 23 CarShop retailers — eight within the U.S. and 15 within the U.Ok.

Penske in the course of the first week of Could closed two of its small CarShop categorical places within the U.Ok., Penske spokesman Anthony Pordon stated final week. Categorical places, that are included within the general retailer counts, are metropolis heart retailers the place prospects can order and take supply of automobiles.

The shuttered categorical websites had elevated prices and hadn’t added incremental CarShop gross sales within the U.Ok., Pordon stated.

Some places beneath building may have delayed openings. Penske has 4 full-fledged CarShop shops, which characteristic service departments and reconditioning facilities, being constructed within the U.S. and U.Ok.

“We’ll monitor the market earlier than we open these up,” Penske stated. “We’ll open on the proper time.”

CarShop bought 63,403 automobiles final yr, up 19 p.c from 2020. It generated $1.48 billion in annual income in 2021.

The enterprise continued to develop within the first quarter of 2022, as income greater than doubled to $515.8 million on gross sales of 19,523 automobiles, up 71 p.c from the primary quarter of 2021. CarShop’s common transaction worth rose 23 p.c to $21,700, whereas its common gross revenue per automobile bought dropped 2 p.c to $2,155.

The CarShop enterprise is working at a gross sales fee that may produce gross sales of 80,000 to 90,000 automobiles in 2022, Penske stated.

Penske stated its value per sale at its U.S. CarShop places surged by $8,500 within the first quarter in contrast with a yr earlier.
Earlier than the stock crunch, greater than 90 p.c of the automobiles CarShop bought have been within the 0- to 4-year-old age group. Now that share is between 60 and 65 p.c, as CarShop has needed to flip to older automobiles, Pordon stated.
With public sale costs so excessive now, Penske stated the corporate goals to self-source extra automobiles — by way of such strategies as trade-ins and direct purchases from prospects — to promote at CarShop shops. And whereas U.S. CarShop shops boosted their self-sourcing share to 66 p.c within the first quarter, Penske stated discovering the best reasonably priced automobiles for the common buyer has been powerful.

“Our candy spot in CarShop is $15,000 to $20,000, not $20,000 to $30,000, since you’re now bumping up into a brand new retail alternative,” Penske stated of the common automobile gross sales worth at U.S. places. “And so we have had to have a look at the long run and stated, ‘Look, let’s decelerate this quicker development till we will guarantee [ourselves] of acquisition on the proper pricing.’ And that is going to occur when the new-car quantity begins to develop, and we get trade-ins.”

Penske Automotive, of Bloomfield Hills, Mich., ranks No. 3 on Automotive Information‘ listing of the highest 150 dealership teams primarily based within the U.S., with retail gross sales of 195,384 new automobiles in 2021. It retailed 264,520 used automobiles that yr, making it No. 5 on Automotive Information‘ listing of the highest 100 used-vehicle retailers.