U.S. auto dealers, flush with cash, are buying each other at a record pace, but they are not closing stores in the process. Defying predictions that the internet and Tesla Inc's direct-to-consumer sales strategy would kill traditional auto dealerships, acquisitions in the sector hit a record $8 billion in value last year, according to data from Kerrigan Advisors, a company that tracks transactions among largely private auto dealer groups. That is more than triple the $2.5 billion for 2020. Most of the buyers were large public or private auto retail chains, such as Asbury Automotive Group Inc. and Lithia Motors Inc. Many of the sellers were smaller, family-controlled operations, said Erin Kerrigan, founder of Kerrigan Advisors. "We had 338 unique transactions in the industry," Kerrigan said. "The prior peak was 288 in 2020." Publicly traded dealer groups bought over 250 dealerships last year, she said. Despite the deal activity, the number of stores that car buyers could visit has remained stable for the past decade, according to a survey by Urban Science, a consultancy. As of July 1, 2021, Urban Science counted 18,157 dealerships, or "rooftops," in the United States, up 46 stores from six months earlier. In 98% of local markets in the United States, Urban Science found no net change in the number of auto dealerships. In short, ownership has consolidated, but the U.S. auto retail infrastructure has not. "As far as the public goes, it looks like the same number of dealers are out there," said Urban Science Global Director of Data Mitch Phillips. For consumers, the consolidation of auto dealer ownership could be largely invisible in the short term. But longer term, industry executives say larger dealer groups will be better equipped to deploy technology to enable faster online shopping and financing, allow customers to select from a wider array of vehicles at multiple stores and get repairs done more conveniently.
