AutoNation Inc Profile
AutoNation, Inc., through its subsidiaries, operates as an automotive retailer in the United States, predominantly in major metropolitan markets in the Sunbelt region.
The company’s stores, which include some of the most recognizable and well-known in its key markets, sell 34 different new vehicle brands. The core brands of new vehicles that the company sells, representing approximately 88% of the new vehicles that it sold in 2023, are manufactured by Toyota (including Lexus), Honda, Ford, General Motors, BMW, Mercedes-Benz, Stellantis, and Volkswagen (including Audi and Porsche). The company also owns and operates AutoNation-branded collision centers, AutoNation USA used vehicle stores, AutoNation-branded automotive auction operations, parts distribution centers, a mobile automotive repair and maintenance business, and an auto finance company.
The company offers a diversified range of automotive products and services, including new vehicles, used vehicles, parts and service (also referred to as After-Sales), which includes automotive repair and maintenance services, as well as wholesale parts and collision businesses, and automotive finance and insurance products (also referred to as Customer Financial Services), which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources. The company also offers indirect financing on certain vehicles it sells through its captive finance company.
Segments
The company operates three segments: Domestic, Import, and Premium Luxury. These segments are consisted of retail automotive franchises that sell the following new vehicle brands:
Domestic: Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ford, GMC, Jeep, Lincoln, and Ram.
Import: Acura, Fiat, Genesis, Honda, Hyundai, Infiniti, Mazda, Nissan, Subaru, Toyota, Volkswagen, and Volvo.
Premium Luxury: Alfa Romeo, Aston Martin, Audi, Bentley, BMW, Jaguar, Land Rover, Lexus, Maserati, Mercedes-Benz, MINI, and Porsche.
The franchises in each segment also sell used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.
Business Strategy
The company seeks to create long-term value for its stockholders and to be the best-run, most profitable automotive retailer and provider of personalized transportation services in the United States. The company strives to be the nation’s most comprehensive provider of transportation solutions to meet the mobility needs of its current and future customers through a comprehensive, unique suite of transportation solutions. The company seeks to deliver a consistently superior customer experience by offering a broad selection of inventory, customer-friendly, and transparent sales and service processes. The company continues to invest in the AutoNation retail brand, promoting personal transportation for America’s drivers, leading the charge to make transformational change in the automotive industry.
Operations
Each of the company’s stores acquires new vehicles for retail sale either directly from the applicable automotive manufacturer or distributor or through dealer trades with other stores of the same brand franchise. The company generally acquires used vehicles from customers, primarily through trade-ins and its We’ll Buy Your Car program, as well as through auctions, lease terminations, and other sources, and it generally reconditions used vehicles acquired for retail sale in its parts and service departments.
The company’s stores provide a wide range of vehicle maintenance, repair, and collision repair services, including manufacturer recall repairs and other warranty work that can be performed only at franchised dealerships and customer-pay service work. The company’s parts and service departments also recondition used vehicles acquired by its used vehicle departments and perform preparatory work and accessory installation on new vehicles acquired by its new vehicle departments. The company also offers product and accessory lines that are integrated into its parts and service operations. In 2023, the company launched AutoNationParts.com, a new e-commerce website enabling customers to purchase high-quality automotive parts and accessories at competitive prices, shipped directly to their homes. In addition to its retail business, the company has wholesale parts operations, which sell automotive parts to both collision repair shops and independent vehicle repair providers.
The company offers a wide variety of automotive finance and insurance products to its customers. The company primarily arranges for its customers to finance vehicles through installment loans or leases with third-party lenders, including the vehicle manufacturers’ and distributors’ captive finance subsidiaries, and receives a commission payable to it from the lender. The company’s exposure to loss in connection with financing arrangements with third-party lenders generally is limited to the commissions that it receives. The company also originates and services consumer auto finance loans through its captive finance company.
The company also offers its customers various vehicle protection products, including extended service contracts, maintenance programs, guaranteed auto protection (known as GAP, this protection covers the shortfall between a customer’s loan balance and insurance payoff in the event of a casualty), tire and wheel protection, and theft protection products, many of which are AutoNation-branded. These products are underwritten and administered by independent third parties, including the vehicle manufacturers’ and distributors’ captive finance subsidiaries. The company sells the products on a commission basis, and it also participates in future underwriting profit for certain products pursuant to retrospective commission arrangements with the issuers of those products.
Agreements with Vehicle Manufacturers
Framework Agreements
The company has entered into framework and related agreements with most major vehicle manufacturers and distributors. These agreements, which are in addition to the franchise agreements described below, contain provisions relating to the company’s management, operation, advertising and marketing, and acquisition and ownership structure of automotive stores franchised by such manufacturers.
Franchise Agreements
The company operates each of its new vehicle stores under a franchise agreement with a vehicle manufacturer or distributor. The franchise agreements grant the franchised automotive store a non-exclusive right to sell the manufacturer’s or distributor’s brand of vehicles and offer related parts and service within a specified market area. These franchise agreements grant the company’s stores the right to use the relevant manufacturer’s or distributor’s trademarks in connection with their operations, and they also impose numerous operational requirements and restrictions relating to inventory levels, working capital levels, the sales process, marketing and branding, showroom and service facilities, signage, personnel, changes in management, and monthly financial reporting, among other things. The contractual terms of its stores’ franchise agreements provide for various durations, ranging from one year to no expiration date, and in certain cases manufacturers have undertaken to renew such franchises upon expiration so long as the store is in compliance with the terms of the agreement.
Regulations
The company’s operations are subject to the National Traffic and Motor Vehicle Safety Act, Federal Motor Vehicle Safety Standards promulgated by the United States Department of Transportation, and the rules and regulations of various state motor vehicle regulatory agencies. In addition, automotive dealers are subject to regulation by the Federal Trade Commission (the FTC). The imported automobiles, parts, and accessories the company purchases are subject to United States customs duties and, in the ordinary course of its business it may, from time to time, be subject to claims for duties, penalties, liquidated damages, or other charges. Further, the company’s captive finance company operations are subject to regulations and supervision by the Consumer Financial Protection Bureau (the CFPB). Among other things, the CFPB is authorized to take action to prevent auto finance companies from engaging in unfair, deceptive, or abusive acts and practices and to issue rules requiring enhanced disclosures concerning consumer financial products and services. In addition, state attorneys general have authority under their respective laws and regulations, and under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), enacted in 2010, to investigate and/or regulate certain aspects of the company’s operations.
The company’s financing activities with customers, including its origination and servicing activities through its captive finance company, are subject to the federal Truth-in-Lending Act, Consumer Leasing Act, Equal Credit Opportunity Act, Fair Credit Reporting Act, federal and state prohibitions against unfair, deceptive, and abusive acts and practices, and various other federal laws and regulations, as well as state and local motor vehicle finance laws, leasing laws, collection, repossession, and installment finance laws, usury laws, and other installment sales and leasing laws and regulations.
Most of the company’s stores utilize aboveground storage tanks and, to a lesser extent, underground storage tanks, primarily for petroleum-based products. Storage tanks are subject to periodic testing, containment, upgrading, and removal under the Resource Conservation and Recovery Act and its state law counterparts. In addition, water quality protection programs under the federal Water Pollution Control Act (commonly known as the Clean Water Act), the Safe Drinking Water Act, and comparable state and local programs govern certain discharges from some of the company’s operations. Similarly, certain air emissions from operations, such as auto body painting, may be subject to the federal Clean Air Act and related state and local laws. Certain health and safety standards promulgated by the Occupational Safety and Health Administration of the United States Department of Labor and related state agencies also apply.
Some of the company’s stores are parties to proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, typically in connection with materials that were sent to former recycling, treatment, and/or disposal facilities owned and operated by independent businesses. The remediation or clean-up of facilities where the release of a regulated hazardous substance occurred is required under CERCLA and other laws.
Seasonality
In a stable environment, the company’s operations generally experience higher volumes of vehicle unit sales in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. However, the company typically experiences higher sales of Premium Luxury vehicles, which have higher average selling prices and gross profit per vehicle retailed, in the fourth quarter (year ended December 31, 2023).
Trademarks
The company owns a number of registered service marks and trademarks, including among other marks, AutoNation and AutoNation USA.
History
AutoNation, Inc. was incorporated in Delaware in 1991.
