By on October 21, 2021

With automobile prices ballooning to egregiously high levels, one might assume that the industry would be in rough shape. But they’d be dead wrong. Supply chain disruptions have actually created a captive market where consumers are desperate to lay their hands on whatever products are available. In the automotive realm, this has allowed retailers to set ludicrous prices and rake in larger profits per transaction. While inflation may eventually catch up to these entities, the gravy train is currently parked at the station and dousing big business with its warm, brown effluence.

Nobody knows this better than the folks at AutoNation. Because the company just released a quarterly profit report that blew its rosiest projections out of the water. Net income its ongoing operations was $361.7 million for Q3 2021, double the $182.6 million witnessed in Q3 of 2020, while revenue rose 18 percent to $6.4 billion. 

According to Reuters, analysts had anticipated the company to report a profit of $4.2 per share on net revenue of $6.2 billion. But AutoNation actually ended up closer to $5.12 per share, thanks largely to how high it can now price secondhand vehicles.

From Reuters:

AutoNation, which reported another quarter of record income, said new vehicle inventory remained at historically low levels leading to a marginal rise in new vehicle revenue in the third quarter ended Sept. 30.

Used vehicle revenue, on the other hand, jumped 53 [percent] to $2.32 billion compared to $1.51 billion a year earlier.

AutoNation Chief Executive Mike Jackson told Reuters that tight inventories and high prices are leading some customers to defer buying a new vehicle. However, Jackson said more customers are using AutoNation’s websites to track vehicles the company’s stores have coming to them in the next 30 to 60 days, and reserving a car or truck before it arrives.

“We’re now at the limit of where can take inventories down to,” Jackson said. “This could be the trough on the disruption, and early next year shipments could improve.”

There are no guarantees, however. Supply chains remain upended due to pandemic-related restrictions and manufacturers are still suppressing output due to the chip shortage. There are even claims that the industry is cutting production intentionally to reduce overhead and artificially spur demand to keep prices high — using the chip shortage as a convenient excuse.

Whatever the reality, vehicle demand is likely to remain high for the foreseeable future and businesses are keen to capitalize on that fact. Jackson confessed that “pent-up demand is building” and assumed the hardcore holdouts would eventually return to the dealership once inventories stabilized a bit. Considering people across the globe have only become more interested in private vehicle ownership as the pandemic has dragged on, there’s reason to believe him. But we’ll have to see how things shake down in 2022.

[Image: David Touchtone/Shutterstock]

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42 Comments on “AutoNation Wildly Profitable While Car Prices Are Grotesquely High...”


  • avatar
    jmo2

    Counting down to the TTAC post about Tesla’s latest earnings:

    Revenue up 98%, Net Income up 998%, net profit margin up 455%, operating income up 302%.

    • 0 avatar
      FreedMike

      Good, now they can afford to hire some quality control experts…which they SORELY need.

    • 0 avatar

      Yeah, agree jmo2 Tesla is doing something wrong.

      • 0 avatar
        redapple

        To the Best and Brightest. RE TESLA.

        I think they are crap. Being an old GMAD Doraville guy responsible for body panel fit, I can walk up to any Tesla and find 5 fit issues. (that even a KIA wont have).

        So why do they sell so well?
        1. They are good BEV?
        2. They are the ‘in’ thing for techies and virtue signalers?

        • 0 avatar
          jmo2

          Maybe there is more to life than panel gaps?

          • 0 avatar
            FreedMike

            @jmo:

            You don’t think quality definitely matters in the luxury segment? Couldn’t disagree more. Ask Cadillac, Lincoln, Jaguar or Alfa Romeo what happens when consumers figure out your quality sucks.

            Right now Tesla has the edge in EV tech, but they’re not great at building cars. They need to get better at the latter because the competition IS good at building cars, and they’re getting better all the time at EV tech.

            Consider this constructive criticism – I want Tesla to survive.

          • 0 avatar
            jmo2

            “ You don’t think quality definitely matters in the luxury segment? ”

            And the quality of Tesla’s tech is exceptional – motors, batteries, UI. You know, the things that matter.

          • 0 avatar
            FreedMike

            “Stuff that matters” to luxury car buyers ABSOLUTELY includes fit and finish.

            The reason why Tesla buyers are overlooking the obvious quality issues is that, as you say, they have great EV tech. But before long, the competition will too. When that happens – and it’s already happening, by the way – people are going to be a lot less apt to put up with Tesla quality problems.

            A company that is this innovative technologically can CERTAINLY address quality issues, don’t you think?

          • 0 avatar
            jmo2

            “ But before long, the competition will too.”

            That remains to be seen. Presumably Tesla’s primary focus in terms of talent and resources is staying several steps ahead on the tech front. That strategy is generating 100% year on year growth so you can’t say the strategy isn’t working.

          • 0 avatar
            FreedMike

            I don’t think it “remains to be seen” – I think it’s being seen right now. The current crop of non-Tesla EVs is RADICALLY better than what we saw even a few years ago.

          • 0 avatar
            Lou_BC

            “Tesla got a score of 176 PP100, which would place Tesla 31st out of 34 brands covered in the 2021 dependability report — if J.D. Power had formally ranked Tesla. … This is because, according to J.D. Power, Tesla doesn’t grant permission to survey owners of its cars in 15 states, unlike other manufacturers.”

            I’m surprised that a manufacturer can block customers from completing vehicle quality surveys.

          • 0 avatar
            mcs

            “I’m surprised that a manufacturer can block customers from completing vehicle quality surveys.”

            They can’t. What they refuse to do is to give JD Power contact information for their customers.

          • 0 avatar

            I always thought that German automakers except of VW/Audi have problem with panel gaps. Still BMW and Mercedes were more popular than Audi in luxury car market. Do I miss something? Why people buy such a low quality car as BMW? Yeah, yeah that one which breaks down very often and is very expensive to fix out of warranty.

          • 0 avatar
            Lou_BC

            @mcs – that makes sense. It wasn’t clear in the article that I copied.

        • 0 avatar
          Lie2me

          You’re a GM Doraville guy, Redapple? Years ago I used to engineer and supply GM Doraville with heating elements for a lot of your machinery. I’ve been in that plant many times when you built the Cutlass Surpreme/Ciera there. I even bought one of the first 5th gens that came off the line. Did you build it? Good car

          • 0 avatar
            redapple

            Lie
            A tip of the cap my brother.
            I was part of the team from the Tech Center that ripped out the Cutlass equipment and tooled up the mini van.

            About 1/3 of the plant after paintshop was mine.

          • 0 avatar
            el scotto

            @Lie2me and redapple Sirs, as a native Hoosier a tip of the hat and a tug of the forelock to both of you. Some GM (and Ford and Chrysler) paychecks sent plant employees and plant suppliers kids to college. Those same men (and a few women too) taught us that hard work, integrity, and saving a bit lead to the good life. We were also threatened with severe beatings of our posteriors if we ever set foot in a plant.

        • 0 avatar
          SCE to AUX

          @redapple:

          Tesla has the highest efficiency and best performance of any EV (except for Lucid, who is just starting out).

          They also make nice-looking cars.

          Not mentioned much: Tesla’s direct sales model is a breath of fresh air for anyone used to dealer hassles.

          I know several people with Teslas; only one is a virtue signaler.

          • 0 avatar
            Lie2me

            I think redapple was addressing quality over efficiency or sales model

          • 0 avatar
            mcs

            From the articles I’ve read, when people find the build quality issues (including things other than panel gaps like dented from spoilers), they flag it on delivery, then they get appointments to get them fixed. The service center then eventually fixes the issues for them.

            I remember my Ford build issues back in the day. It was a cross-threaded bolt in the dash causing a loud squeak. It was a multi-month ordeal fighting with the dealer and Ford to get it fixed.

            Other manufacturers like GM and Ford still have even worse build quality issues than Tesla. People keep buying their stuff.

            By no means am I excusing Tesla’s build quality. It’s inexcusable. I’m hoping with the new plants it will get better, but we’ll see. Would it stop me from buying a Tesla? Maybe slow me down a bit. I’d really like an Austin car, but may have to get something sooner. At least, I’d like to try to get one of the refreshed cars with the castings. The new process should be (crossing fingers) better in terms of finish.

            My biggest issue with Tesla is still the third-party repair support. That’s something that I hope is improving.

          • 0 avatar
            FreedMike

            @mcs:

            OK, the quality problems wouldn’t stop you from buying a Tesla now. But let’s say that you could buy an EV that’s at least competitive with a Tesla tech-wise right now, without all the Tesla quality issues and needless Tesla nonsense (yoke steering wheels, weird styling, “Ipad for everything” dash, etc).

            That wouldn’t sway your decision? It sure would for me. Example: I would take an Audi E-tron GT over a Model S 100% of the time, even with the lower range and the somewhat higher price. Why? Because I’ve checked out an E-Tron GT, and it’s drop dead gorgeous, built like a Rolex, and has a vastly better driver interface. The Model S I checked out right afterward felt like a $20,000 GM car by comparison.

          • 0 avatar
            ajla

            “But let’s say that you could buy an EV that’s at least competitive with a Tesla tech-wise right now, without all the Tesla quality issues and needless Tesla nonsense.”

            If there was a $55K Genesis EV that had the range, output, and recharge speed of a Model 3 LR but was a normal G70 sedan everywhere else I would buy it.

            But no one is there yet.

          • 0 avatar
            mcs

            @FreedMike:

            I’m looking really close at the Polestar Precept for the daily driver. Of course, everything depends on when I need a new daily driver and I might need a second daily driver if one of my projects ends up requiring me to have a second residence in a place that requires flying to get to.

            As for styling, the Precept is great, but Tesla sedan styling isn’t an issue other that the fact they are really common where I live. I don’t like the styling on any of CUVs, except maybe for the KIA EV6 or the Hyundai version.

            The touchpad thing doesn’t bother me. I’ve been using touch screens since I was a teenager and they are second nature to me. When driving, I prefer steering wheel controls and Tesla has those. Recently, a friend showed me all of the things you can control by voice in a Tesla. There are over 100 commands including things like seat heating and cooling and other HVAC related operations. You can even redirect airflow direction. Wipers and wiper speed can be controlled as well. I’m used to voice control in my current vehicles so I’m fine with that. It’s easier to perform a function by voice than it is to fumble for a discrete control. Especially if you’re in a situation where you need both hands on the wheel. It’s been years since I’ve operated an infotainment system without voice. I’m used to requesting albums and songs by voice and I’m not going back.

            At the end of the day, I think my choice for a daily driver could end up being whatever is available. I may also end up spending more to get myself higher in an order queue. I might even go for something dirt cheap if the mood strikes me, especially if I happen to have a lot of business expenses when I’m shopping for it. Whatever I get will also be sharing garage space with pricier stuff, so will probably end up seeming cheap no matter what it is.

          • 0 avatar
            el scotto

            Gents, I gotta go with FreedMike on this one. I saw an Audi E-Tron, at Wal-Mart of all places. Simply gorgeous and the lady was charging it while she was inside getting whatever you get at Wallyworld. To me, Teslas aren’t that good looking and you’re doing a 3-ball juggle of Tech, Quality Control, and Looks. The 1st EV maker who rolls ball bearings down their panel gaps wins.

    • 0 avatar
      MitchConner

      I really admire Elon Musk for being the tip of the spear for the electric car revolution. The company nearly died a few times and he personally went through a tremendous amount of stress while holding it all together. All while working on SpaceX. He’s really something — although the overpromises and hype of crap like AutoPilot’s annoying.

      While the build quality of their cars isn’t the best — they’ve got enough geegaws and doodads to pacify the douchy clientele Tesla attracts. They also like the no haggle buying process — because they don’t have the spine to get a salesman angry enough with hardball negotiations to throw a clipboard (like my Dad did at Crestview Cadillac in West Covina, CA in 1990).

      Even with normal supply levels of new vehicles in Silicon Valley — it’s really hard to get a good deal on a car. Some overpaid dope waltzes in, is told $500 off is the best that can be done on some run of the mill car — and they take it. I quit buying cars in Silicon Valley in 2014 — and bought several cars in the Los Angeles area before eventually moving out of state. A new 2014 Fusion Titanium for $6K under sticker plus a bunch of rebates. A new deadstock 2015 Fusion for $15K under sticker. A used 17 Mustang GT ragtop (tripped in 18) that stickered for $53K with $10K worth of wheels, tires, suspension, and drivetrain mods for $25K (had 12K miles and was the dealer’s wife’s car — and was perfect). You can’t do that in Silicon Valley anymore.

      That said, Tesla’s quality and service could cause long-term problems. Know a bunch of people who have them. They’re tired of headlights and tail lights filling up with water. Having their cars sitting in the shop for months because there weren’t any parts (even before pre-Covid supply issues kicked in). Model X owners who have issues with the doors every other month. There was a guy who parked in the assigned spot next to me in an San Jose apartment complex who had a different car every month. A VW. A Kia. A Hyundai. A Chevy. Finally crossed paths with the dude and asked if he got cars from a pool or something. Nope. Rentals because his X was in the shop all the time — and he and his wife were really pissed. Finally saw it for a week — then gone again. Derp. Why they didn’t go Lemon Law is beyond me.

      When similar products come out — Tesla’s going to have their hands full hanging onto customers like that. In the meantime, the company’s keeping a lot of people employed at their Fremont (and soon Austin) factory and that’s pretty cool. I hope they do well despite the annoying fanbois who are as irritating as the Prius morons from days of yore.

    • 0 avatar
      BSttac

      China, China , China

  • avatar
    Fred

    Buy low sell high, that’s how you do it. I’ll add I bought my TSX Wagon from Auto Nation (before all this craziness) and felt they treated me right.

  • avatar
    indi500fan

    Local Carvana has a 2011 Ford Ranger 2wd short cab 60,000 miles for 17 grand. It’s a crazy world.

  • avatar
    ToolGuy

    “This could be the trough on the disruption”

    And I -could- be Batman.

  • avatar
    28-Cars-Later

    Auto Nation: All your cash are belong to us.

  • avatar
    Lie2me

    Carmax must also be doing well, they just offered my 94 year old dad $7700 for his 2011 Impala. Unbelievable good offer, but he’s having trouble letting go of his last car :(

    • 0 avatar
      SCE to AUX

      That’s a hard place to be for the family. We had to put my FIL’s keys in a ‘safe place’ while his car sat in the garage until he passed.

      • 0 avatar
        Lie2me

        We about ready to do the same, fortunately my 92 year old mother still drives, but she’ll only drive her 20 year old PT Cruiser. The Impala makes her nervous, “It’s so big” Lol

    • 0 avatar
      Lou_BC

      @Lie2me – my mom drove to 84. She was kinda scary but stereotypically only drove to church on Sundays and the odd errand. In BC once a driver hits 80 they have to get a physical and pass a driver’s test every 2 years. She passed at 80 and failed at 82. She was pizzed off for years but it was for the best. She lived to 92. Succumbed to a broken hip. Her brothers living in rural Quebec drove into their 90’s. Fortunately there wasn’t much traffic if farm country.

      • 0 avatar
        Lie2me

        My mom has 46K miles on her 20 year old PT Cruiser that she bought new. That’s a lot of trips to the Piggly-Wiggly and back. My folks live in rural Wisconsin and they’re pretty lax on who can drive for how long, or what you drive for that matter. No inspections and you renew your driver’s license every ten years online no questions asked

  • avatar
    thegamper

    I have two 2019’s in my garage purchased pre-pandemic and just bought kid a used car that is probably good for 100k miles. I am riding this out as long as it takes. Not paying these inflated prices.

  • avatar
    gasser

    I don’t think that this used car price explosion is going to end in the next year or two. U.S. is losing about 4 million vehicles production per year due to whatever excuse you want to hear. Vehicle loss from use, collision, and the heavy flooding in many areas continues. Even if/when vehicle production normalizes, the used car market will still be “short” millions of units.
    The federal government, when calculating the inflation rate, is discounting this balloon in used car prices as a “one off” incident. I don’t agree and think that the cost of a vehicle (and rising fuel prices) are big markers of future inflation and will be with us for several years to come.
    Fingers crossed for the longevity of my 2005 Lexus and my 2012 Honda!

  • avatar
    MitchConner

    Car prices are nuts right now. Want new? You’re paying sticker. Used? Even worse. There are 7 year old cars with 20,000+ miles on dealer lots going for 90% of their sticker price when new. Hard pass.

    If you’re smart there’s no point even looking for 6-9 months unless you get lucky and find something private party at a decent price — or you’ve leased a car and decide to buy it when the contract’s up.

    That said, it’s a great time to unload a used car you don’t use much anymore. 2014 GMC Denali with 90K. Impeccably maintained. $25K instant offer. Sold.

  • avatar
    BSttac

    In the end, the buying public always suffers. Never feel sorry for car sellers

  • avatar
    SoCalMikester

    i dont feel bad for the buyers either, unless something happened that they NEED a car

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