Automotive sales have taken a hit amid supply chain backups and a shortage of microchips, but industry analysts expect a return to pre-pandemic levels in 2023.
That confidence is reflected in the recent acquisition of two prominent Southland dealerships.
Costa Mesa-based Nouri/Shaver Automotive Group completed its acquisition of Worthington Ford in Long Beach in February. That was followed the same month by Fletcher Jones Automotive Group‘s purchase of Carson Toyota
The Long Beach dealership now operates as BP Ford and the Carson dealership has been rebranded as Fletcher Jones Toyota of Carson. Employee staffing at both locations has remained intact.
DCG Acquisitions, which handled the Fletcher Jones transaction, said that deal speaks to a growing confidence in the industry.
“It’s a strong indicator of the competitive opportunities and high dealership valuations we anticipate seeing throughout 2023,” said George Pero, DCG’s national vice president of sales.
The deal continues DCG’s 2023 merger and acquisition momentum, which began the year with 24 acquisitions already in motion, the company said.
Buying Worthington Ford boosted Nouri/Shaver’s portfolio to 17 Southern California dealerships, while Fletcher Jones’ latest buy expanded its operations to include 16 new car dealerships, with locations spread across California, Nevada, Illinois and Hawaii.
Automotive World, an industry publication and research/consulting firm, predicts global auto sales will return to pre-pandemic levels with growth of 9% this year.
But it won’t all be smooth sailing.
“It’s clear that the automotive industry will need to find ways of navigating the supply chain disruptions caused by the pandemic, and new approaches will be required to tackle worsening bottlenecks, which have been exacerbated by the war in Ukraine,” the company said.
The microchip shortage has gotten much better since 2021, although it hasn’t gone away entirely, and supply chain snarls continue to periodically disrupt output.
Fletcher Jones III, chief operating officer for Fletcher Jones Automotive Group, said his company was affected by the shortage of microchips, which control everything from the powertrain to infotainment systems on vehicles.
“It has definitely affected our inventory availability across all manufacturers,” he said. “But we do see improvement, and I think we’ll continue to see improvement in inventory levels moving forward.”
Nouri/Shaver CEO Armina Mgerian said her business has been strategic in its acquisitions since the company formed in 2015.
“When we started this new company we were looking for dealerships that were in the right areas but weren’t performing well based on sales volume,” Mgerian said. “But (Worthington Ford) has been a legacy operation. We also acquired Winn Chevrolet in Carson in November.”
Automotive World said carmakers are expected to shift from “just-in-time” vehicle deliveries to “inventory banking” strategies with more vehicles on hand, despite the additional inventory costs.
The US. light vehicle market is projected to grow by 10% to 12% in 2023, with total sales of more than 14.5 million vehicles, Automotive World said, although macroeconomic issues and geopolitical uncertainties present a significant risk to that projection.
Electric vehicles, which have typically occupied a small sliver of the overall market share, are expected to see 61% growth, or around about 1.5 million vehicle sales. That would boost the EV market share to 10%, compared with 7% in 2022.
The move toward electrification is expected to gain additional momentum in 2023, owing to the regulatory push for bans on some types of internal combustion engine vehicles.
In August, California regulators passed rules banning the sale of new gas-powered cars by 2035. Henry Lee, director of the Environmental and Natural Resources Program at the Harvard Kennedy School, figures other states will follow.
“There is some pushback that the move to EVs is going too fast, that maybe we should examine other technology like fuel cells or greater use of biofuels,” Lee said in a September 2022 interview with the Harvard Gazette. “But not all of these options get you to net zero, and we need to get to net zero faster than a lot of people expect.”
Source: Orange County Register
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