By Joseph White and Rachit Vats
(Reuters) – U.S. auto dealer AutoNation Inc’s quarterly profit nearly doubled on Wednesday as a stronger-than-expected recovery in demand and tight inventories helped drive more profit per vehicle just months after the pandemic slammed the economy.
Chief Executive Mike Jackson told Reuters he is optimistic looking ahead. Interest rates will be “very low for a long time,” he said.
Low rates help consumers afford more expensive vehicles, and reduces AutoNation’s inventory finance costs.
The pandemic has driven consumer demand for their own vehicles rather than sharing rides, or taking trips on a plane.
“We had far more demand than supply,” Jackson said. “We have adjusted pricing to reflect that.”
AutoNation said it had 43 days supply of new vehicles in the third quarter compared with 55 a year earlier.
The pace of U.S. car and light truck sales has increased each month since lockdowns were lifted, on the back of strong demand for high-profit sport utility vehicles and pickup trucks amid tight inventories.
AutoNation’s net income rose to $182.6 million, or $2.05 per share, in the third quarter ended Sept. 30, from $99.5 million, or $1.10 per share, a year earlier.
While overall revenue fell as the Fort Lauderdale-based company sold fewer vehicles, its gross profit per new vehicle jumped 58% to $2,533 during the quarter and rose about 45% to $1,994 for used vehicle.
Total revenue fell 1% to $5.4 billion as new vehicle sales were down 11% at 65,998 vehicles during the third quarter. Used vehicle volume rose 1.6% to 64,587 units.
AutoNation’s overhead costs for the quarter were 64.4% of revenue, below the company’s target of 68%.
Jackson said this reflects the lower cost of selling vehicles through digital platforms.
“The costs we took out are permanent,” he said.
Reporting by Joe White in Detroit and Rachit Vats in Bengaluru; Editing by Krishna Chandra Eluri.