Automotive News - May 6, 2019 - Retail - 4

4 * MAY 6, 2019

EchoPark has its first profitable quarter
Sonic: Its used-car stores will sell more than new-car outlets
Melissa Burden
mburden@crain.com

Sonic Automotive Inc.'s EchoPark
brand of standalone used-vehicle
stores turned a profit for its first
quarter ever, and Sonic executives
have a bold prediction: EchoPark
will grow to sell more used vehicles
and make more money than the
franchised dealerships that make up
the nation's fifth-largest auto retailer.
"As we expand our footprint into
other areas across the country, we

believe EchoPark will exceed the
overall volumes and profitability of
our franchised dealerships," Sonic
CEO David Smith said last month in
a statement. "We believe the combination of our customer-centric
shopping experience, high-quality
vehicle offerings, rock-bottom pricing and transparent trade-in appraisals is disrupting the pre-owned
markets that we serve."
Sales at EchoPark's eight stores
more than doubled to 11,051 vehi-

cles in the first quarter, and revenue
surged 90 percent to $249.6 million.
Its total front-end and finance-and-insurance gross profit
per vehicle - which includes little to
no front-end gross - jumped 25 percent to $2,351 in the quarter.
That all helped EchoPark to post
pretax income of $200,000 for the
three-month period. EchoPark
launched its first store in late 2014.
And more stores are coming.
"Our EchoPark brand had an historic

quarter demonstrating the huge
growth EchoPark
will achieve as we
add additional
markets across
the United States.
We expect 2019
EchoPark reveSmith: Revenue
to pass $1 billion nues to exceed $1
billion,"
Smith
told analysts after Sonic issued its earnings April 25. "We expect EchoPark to
retail approximately 50,000 pre-owned
vehicles in 2019, which is about five

times the volume we were selling just
two years ago."
EchoPark's sales in the first quarter
represented nearly 29 percent of
Sonic's used-vehicle sales. Sonic's
total used-vehicle unit sales jumped
14 percent to 38,463.
Revenue for Sonic's franchised
segment of 92 stores dropped 5.7
percent to $2.14 billion in the quarter, while gross profit for the franchised dealerships dipped 2.1 percent to $333 million.
see SONIC, Page 41

AutoNation's
higher-margin
strategy works

Nissan's full-size Titan,
top, and midsize Frontier
struggle in the U.S., but
Valls believes the next
Frontier will be "a game
changer for us."

But volume declines sharply
Hannah Lutz
hlutz@crain.com

"I'm a truck man.
But I have my
own ideas."
Jose Luis Valls

After nearly two years of weakening profit per
new vehicle, AutoNation Inc. reversed its streak
last quarter by holding price and forfeiting volume.
The nation's largest new-vehicle retailer is experimenting with one approach to manage the
new-vehicle profit squeeze
that has been bedeviling dealers. As price competition intensifies and automakers shift
more of the profit opportunity
to special target-based incentive programs, retailers have
grappled with how to strike
the price-to-volume balance.
Dealership operating profit Liebert: "Right
has dwindled, with some deal- play for us"
ers claiming that it's almost
impossible to make money on new vehicles.
AutoNation's strategy to lift new-vehicle margin
worked, and new AutoNation CEO Carl Liebert
says it's an initiative that will play out beyond the
first quarter. But it comes at a cost: AutoNation's
new-vehicle unit sales decline was much sharper
see STRATEGY, Page 53

AUTOMOTIVE NEWS ILLUSTRATION

A TON OF FAITH

lchappell@crain.com

EW YORK - When Nissan's
new North American chairman
proclaims himself a "truck man
from the South," he is bringing a
different perspective to the
pickup conversation.
"When I say 'southern,' I mean
all the way to Argentina," says
Jose Luis Valls, the Argentine
who was named chairman of
Nissan North America in March.
"I'm a truck man. But I have my own
ideas. I'm more into the one-ton pickup,
where Nissan is quite strong globally."
The words may signal a strategy shift for
Nissan. For the past few years, Nissan has
pinned part of its U.S. growth hopes on

cracking into the full-size pickup segment
with a redesigned Titan. That hasn't materialized.
Nissan has invested heavily in the big
truck's second generation and its variations, its engines and its factory in Canton,
Miss. But the campaign has barely moved
the needle in a full-size pickup
market dominated by the Detroit 3. For all of its trouble,
Nissan Division sold just
more than 12,000 Titans in
the first four months of this
year, down 21 percent
from a year earlier. By
contrast, Nissan's closest
Valls: Nissan must play to its
natural global strength.

Michael Martinez
mdmartinez@crain.com

Detroit competitor, Fiat Chrysler Automobiles, sold more than 169,000 Ram pickups in the same period, up 18 percent.
Valls has a different idea.
He believes Nissan must play to its natural global strength - the midsize pickup,
referred to elsewhere in the world as a
"one-ton pickup." Nissan sells its smaller
truck globally, and in many cases does
well in markets where the Detroit 3
are small players.
That truck - marketed as the
Frontier in the United States but
under different names elsewhere
- represents a segment in which
Nissan has a chance of capturing
more U.S. sales while the Titan

DETROIT - Ford Motor Co. is rethinking how it
rewards loyal customers, thanks in large part to
input from its retail network.
The automaker last week unveiled FordPass Rewards, an app-based loyalty program that awards
points for spending money on vehicle maintenance. Ford's last program,
Owner Advantage Rewards,
was underutilized, available
at just 400 of roughly 3,000
Ford brand dealers in the U.S.
Unlike the former program,
which placed the financial
burden on dealers, Ford will
fund FordPass Rewards fully,
FordPass Rewards
although officials declined to
relied on input
reveal the projected cost.
from dealers.
When it launched in April, virtually every Ford dealer was signed up.
The automaker spent considerable time crafting
the program with the Ford national dealer council
over the last 18 months. One idea it adopted on

see NISSAN, Page 41

see FORD, Page 52

In tough pickup landscape, Valls sees midsize as Nissan's sweet spot
Lindsay Chappell

Ford revamps
customer loyalty
points program

Automotive News - May 6, 2019 - Retail

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