How Sonic Automotive was able to break records in 2022 — Jeff Dyke

Sonic Automotive recently reported revenue records for the fourth quarter and fiscal year of 2022. On this episode of Inside Automotive, Jeff Dyke, the dealer group’s President, joins host Jim Fitzpatrick to discuss the company’s recent earnings call, and provide his expectations for the 2023 car market.

Even though the used vehicle market suffered during 2022, and faces an uphill battle in 2023, Sonic Automotive’s preowned brand, EchoPark, started the year with a 5% increase in annual revenue. Although he acknowledges that price fluctuations in the preowned sector were difficult to navigate, Dyke explains that by carefully managing the company’s day supply and keeping inventory tighter than other competitors in the used car market the brand was still able to break revenue record. Although the success failed to prevent a net loss in Q4, the result of large impairment charges, Sonic Automotive expects EchoPark to earn even more revenue this year, and be profitable once again by Q1 of 2024.

Dyke believes 2023 will be an even more successful year for both the Sonic Automotive brand and the automotive industry as a whole. Although economic headwinds such as interest rate hikes, affordability or even a recession are likely to complicate plans in the initial quarters, most dealerships are making early preparations to navigate increased expenditure. OEMs are also likely to keep production limited in order to accommodate supply chain strains, which will keep new vehicle prices high. “There’s going to be some topsy-turvy times here over the next…12 months, but I don’t think it’s anything to be staying up at night about,” explains Dyke. “I think we’re in really good shape.”

In terms of vehicle inventory, Dyke notes that supply is still fluctuating, although growth remains steady across OEMs. Although dealers will need to closely monitor their inventory, he expects the ideal supply duration to reach 30 days at least, although further gains are possible.

The use of leasing has largely fallen to the wayside, as monthly lease payments have increased substantially. Buyers are still pressed for cash, and as financing alternatives become less useful, they are likely to stay out of the car market until conditions improve. Although he believes that a correction is inevitable, Dyke notes that the change will need to come from manufacturers.

The success of Sonic Automotive highlights how well the automotive industry has adapted to unfavorable market conditions. By continuing to evolve and improve their efficiency, dealers can make 2023 an even more successful year.