The 40 largest auto dealers in Orange County combined for $5.3 billion in sales for the 12 month period that ended June 30, a 1.5% increase that marks a significant slowdown from recent years, according to this week’s Business Journal list.
The top dealers here combined for a 5.9% jump in sales over the same period last year, and had notched similar annual gains since the recession.
The slower gains in local sales are generally in line with the national pace: auto dealers throughout the U.S. collectively sold 17.4 mil lion vehicles last year, a 5.7% increase compared to 2014, but dropped to a 1.5% growth pace during the first six months of this year, according to New Jersey-based market researcher Autodata Corp.
The county has 123 franchised autodealers, and they together generated $12 billion in sales last year, employing 12,300 with a total payroll of more than $676 million, according to the Orange County Automobile Dealers Association in Newport Beach.
The 40 largest dealers, that make up the Business Journal’s list combined for sales of 93,542 new vehicles and 37,198 used models in the 12 months through June, a 0.9% uptick on a unit basis.
Twenty dealerships reported increases in revenue, and 11 showed declines. Figures for the remaining nine are Business Journal estimates.
AutoNation Inc. plans to build a Porsche dealership on a vacant lot along the Santa Ana (I-5) Freeway near Scientific Way in Irvine, according to permits filed with the city. It bought an “open point” that gives it exclusive rights to sell the brand in a specific geographic area typically a 10-mile radius.
Several local dealerships changed hands over the past year or so, with new owners looking for economies of scale. “Especially in California, where the cost of doing business is so significant, dealers are finding it much more effective to be larger in size, in organization—because they gain tremendous scale in terms of their legal costs, their HR, advertising, and particularly their technology expenses,” said Erin Kerrigan, founder of Irvine-based Kerrigan Advisors.
Kerrigan has worked on the sales of about 30 dealerships in the past couple of years, including Irvine-based Fladeboe Automotive Group’s sale of its three dealerships to Newport Beach-based Conant Auto Retail Group in 2014.
More recent deals include:
“Including real estate, the average Orange County dealership transaction can be well north of $20 million in value,” for one franchise Kerrigan said, adding that she thinks that despite a slowdown in sales pace, the local market will continue to consolidate due to a “generational shift that continues where dealers are deciding it’s either time for retirement or families are saying it’s time for us to sell this huge entity,” and because dealership “valuations are still very strong,” with “tremendous amount of capital coming into auto retail.”
The six automakers with U.S. operations based in Orange County combined to employ 2,222 local workers as of October, up 20% over the year-earlier period.
The companies accounted for 1.88 million vehicles sold during the period, up 8.2%.
Expect to find the recently established Genesis Motors USA in Fountain Valley on next year’s list. The automotive brand, a Hyundai Motor America spinoff, was formalized in March. The vehicles are distributed through a subset of about 350 Hyundai dealers. Genesis sold 1,497 vehicles in August— its first month on the market—1,211 in September and 1,201 in October, bringing its 2016 total to 3,909.
OC also is home to Aston Martin Americas, which employs 21 workers in Irvine. The luxury automaker sells about 4,000 cars a year at $115,000 to $337,000 each. Newport Beach Aston Martin, the only Aston Martin dealership in Orange County, “sold over 50 Aston Martins last year.”