Practically half of sellers plan to purchase a number of dealerships within the subsequent 12 months, whereas solely 2 % anticipate to promote in that time-frame, in keeping with a survey by dealership sell-sell agency Kerrigan Advisors.
“As a disproportionate variety of sellers plan for progress somewhat than exit, Kerrigan Advisors expects at this time’s vendor’s market to persist into 2023,” the Kerrigan Vendor Survey finds.
Greater than 600 sellers responded from July to September for the fourth annual survey, and although outcomes pattern constructive, there are stark variations in expectations in contrast with final yr’s survey. In 2021, for instance, 77 % of sellers stated they deliberate to purchase a number of dealerships within the coming yr, in contrast with 48 % this yr.
Half of these surveyed do not plan to purchase or promote any shops within the subsequent yr — greater than the 20 % who stated so in 2021. The quantity planning to promote no less than one dealership within the subsequent yr additionally dropped by 1 proportion level within the 2022 research from 3 % in 2021.
Extra sellers anticipate the worth of their dealerships will decline within the subsequent yr. Simply 6 % anticipated a lower in 2021, whereas this yr, 20 % are predicting a lower — the best proportion within the 4 years of the survey.
One-fifth of sellers anticipate the worth of their retailer or shops to extend — additionally the bottom determine since 2019, when it was 26 %.
“So, that to me was fairly notable that there’s a rise, a slight rise in destructive sentiment, though general sellers expect a robust efficiency into 2023 when it comes to earnings and when it comes to valuation,” Erin Kerrigan, managing director of Kerrigan Advisors of Incline Village, Nev., advised Automotive Information.
In 2021, 33 % of sellers predicted their retailer valuations would stay the identical over the subsequent 12 months, with that determine leaping to 60 % in 2022.
“The overwhelming majority of sellers anticipate each valuations and earnings to both keep at at this time’s document worth or rise,” Kerrigan stated. “In contrast, a rising minority of sellers do anticipate each a decline in valuation and a decline in earnings within the subsequent 12 months, in order that’s a reasonably attention-grabbing dichotomy.”
Three-quarters of sellers predict earnings will stay the identical or are available in greater over the subsequent yr, however the proportion anticipating an increase has decreased sharply.
Thirty-four % anticipate their earnings to be greater in 2022 — down from 79 % final yr.
And whereas simply 15 % anticipated earnings to remain flat in 2021, that determine jumped to 41 % this yr. Sellers anticipating decrease earnings rose to 25 % from 6 %.
Most sellers predict the worth of franchises will keep the identical or enhance. Apart from one, all are seeing a drop within the variety of sellers predicting values will stage off or rise, and a rise in these predicting a lower.
Nissan is the one exception. Nissan has no change within the proportion of sellers predicting the worth of its franchises to remain the identical or rise, and sees a lower of 8 proportion factors in sellers predicting worth to say no.
Greater than 40 % of sellers predict these three franchises will enhance in worth: Kia (46 %), Hyundai (45 %) and Toyota (41 %). It is the primary time Kia and Hyundai have handed Toyota to prime the outcomes, in keeping with the survey.
Kerrigan stated the rise of Kia and Hyundai to the highest might be essentially the most “headline-catching change” within the franchise questionnaire, particularly since they handed Toyota for the primary time on this class.
“I believed that was fairly exceptional, particularly when you consider the truth that … in 2019, simply 19 % of sellers surveyed projected that [Kia and Hyundai] would enhance in worth,” Kerrigan stated.
“That is a really vital rise, and it demonstrates that with Kia and Hyundai, the success that they had in ’21 and ’22 is anticipated to proceed, as a result of we noticed an enormous bounce final yr in sellers anticipating their worth to extend, and it is sustained into 2023, by these projections,” she added.
Most sellers really feel that whereas automaker adjustments won’t have an effect on earnings, they will not assist enhance earnings both. Home franchises together with Chevrolet, Buick-GMC, Cadillac, Lincoln and Volvo have the best % of sellers anticipating destructive change. Ford is on the prime of that record, with 59 % predicting automaker adjustments will negatively have an effect on earnings.
“Ford has been essentially the most vocal about their view that the community wants to alter,” Kerrigan stated. “And that the way in which retailers retail EVs must be totally different.
“And, they have been fairly outspoken about the way in which pricing can be on these future automobiles, so I believe there are simply so many query marks in regards to the future … we at all times discover when there may be uncertainty, it tends to scale back valuation,” she added.