AutoCanada Inc. isn’t getting out of the new-vehicle enterprise, however the dealership group that owns 83 franchised shops in Canada and the US is leaning on the used aspect of its operation to develop gross sales and supply a hedge towards ongoing turbulence within the new-car market.

The corporate is “beholden” to the automakers it represents for new-vehicle stock, mentioned AutoCanada Govt Chairman Paul Antony, however the “unconstrained nature” of the used-vehicle phase provides the corporate “wide-open runway” to develop.

“We need to change into untethered to the constraints that we have now on the new-car enterprise, and [with] promoting simply new automobiles,” Antony mentioned on the corporate’s newest quarterly earnings name Could 4.

Used-vehicle gross sales development has been a key goal for Antony and the Edmonton-based dealership group’s administration workforce since taking up management of AutoCanada almost 5 years in the past, and one the corporate has made appreciable headway on. In 2018, the corporate offered 0.62 used automobiles for each new automobile pushed off the lot. Within the first quarter of 2023, that ratio had climbed to 1.72 used automobiles for each new sale.

USED ‘OFF THE CHARTS’

Antony expects AutoCanada’s used quantity, and the broader used market, to proceed to strengthen as new-vehicle inventories stay “constrained for many manufacturers.”

“Used goes to be off the charts for the following three to 4 years,” he mentioned, pointing to restricted automobile manufacturing because of the pandemic and microchip scarcity.

“We’re brief roughly 9 to 10 million automobiles that weren’t constructed for North America within the final three to 4 years, which implies that we’re brief 9 to 10 million used automobiles that haven’t been constructed.”

Prospects are additionally feeling monetary stress due to current rate of interest hikes, main many to hunt automobiles with cheaper price factors, which regularly means used, Antony added.

AutoCanada’s profitability fell within the first quarter of 2023, a results of the identical rate of interest pressures skilled by its clients, in addition to poor efficiency at its U.S. dealerships. Its new-vehicle gross sales quantity additionally declined, dropping to eight,771 items, 3.1 per cent decrease than the identical three-month interval a 12 months earlier.

However as new-car volumes dipped, the corporate’s used enterprise continued to develop. It reported used-vehicles gross sales of 15,290 items for the primary quarter of 2023, up 8.7 per cent from the identical quarter a 12 months earlier, and never far off its document for 1 / 4, set throughout the busier spring promoting season.

USED HELPS PROFITABILITY

The used-car focus has additionally helped AutoCanada increase profitability in F&I departments, and its elements, service and collision restore enterprise, Antony mentioned. Gross revenue throughout the two segments rose 5.8 and 19.7 per cent, respectively, in comparison with the identical quarter a 12 months earlier.

Amongst different steps to spice up profitability inside its used-vehicle gross sales wing, the corporate has prioritized decreasing the period of time it takes to recondition stock.

In 2018, Antony mentioned the corporate took about 48 days to arrange used stock on the market. Within the newest quarter, that determine was between 27 and 28 days, serving to trim flooring plan financing prices. However chopping reconditioning timelines stays a work-in-progress, with the trade common working between 10 and 14 days, he added.

An expanded partnership with on-line categorized website Kijiji.ca, which lists 1.4 million for-sale-by-owner automobiles on its platform every year, represents one other used-vehicle development avenue, Antony mentioned.

The deal, introduced March 31, builds on a earlier relationship between the 2 corporations, and can give AutoCanada the power to market its F&I merchandise on automobiles offered on the platform, in addition to buy used automobiles from sellers on the location so as to add to its personal used-car stock, Antony mentioned Could 4.

Regardless of prompts from monetary analysts on the earnings name, Antony divulged few different specifics of the Kijiji deal, however mentioned the corporate’s alternative with the net market is “of an unique nature.”

AutoCanada wouldn’t make Antony out there for an interview on the corporate’s used-vehicle enterprise.

Whereas Canada’s solely publicly traded dealership group is more and more dialled into its used-, versus new-car operation, Antony mentioned these buyer relationships finally come full-circle.

“We’re positioning ourselves to promote quantity and to promote used automobiles with a view to drive enterprise by way of our outlets and dealerships that we expect is extra sustainable. And finally, that used-car buyer — if we deal with them proper and repair them effectively — they find yourself changing into a new-car buyer.”