AutoNation CEO Warns of Glut in Luxury Cars

Washington DC January 7, 2016; The AIADA newsletter reported that AutoNation Inc. Chief Executive Mike Jackson warned on Wednesday that a bulging inventory of unsold cars—especially luxury models—is beginning to erode the profit margins dealers and automakers have been enjoying amid sizzling U.S. auto sales.

"December was not the month everybody thought it was," Mr. Jackson said. "We are entering a new chapter. Yes, sales will still be above 17 million this year, but the quality of those sales in terms of lower incentives are now a challenge."

According to The Wall Street Journal, December sales for the nation's largest dealership operator rose 9 percent to 35,962 vehicles compared with the same period a year earlier. However, Jackson said the 9 percent gain is misleading since the boost was propped up by "significant retail discounts" within the luxury vehicle segment and a few more selling days. Subtract those two elements and year-over-year sales were flat.

AutoNation dealers had to offer more cash on the hood to close deals, Mr. Jackson said. The move reduced the Fort Lauderdale, Fla., company's per-vehicle gross profit for new and used vehicles by as much as $300 in the fourth quarter of 2015 compared with the same period a year earlier.

For more on Mike Jackson's thoughts on luxury cars and their impact on the market, click here

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