News Summary
Sonic Automotive has announced its acquisition of four Jaguar Land Rover dealerships in California, making it the largest retail ownership group for these brands in the U.S. The acquisition, sourced from US Auto Trust, is expected to generate approximately $500 million in annual revenue, representing 5-7% of Sonic’s total revenue. Following this strategic move, Sonic Automotive’s shares saw a 3.5% increase. CEO David B. Smith highlighted the growth potential in the luxury market and aims to integrate these dealerships with Sonic’s EchoPark division to meet rising luxury vehicle demand.
Charlotte – Sonic Automotive, one of the United States’ leading auto retailers, has announced its acquisition of four Jaguar Land Rover dealerships located in California, including facilities in Los Angeles, Newport Beach, San Jose, and Pasadena. This strategic move positions Sonic Automotive as the largest retail ownership group for Jaguar and Land Rover brands in the U.S. by volume.
The dealerships were previously under the ownership of US Auto Trust, and this acquisition is projected to significantly boost Sonic Automotive’s financial performance, generating approximately $500 million in annual revenue. This figure is expected to account for 5-7% of Sonic’s total revenue moving forward.
As a result of this acquisition, Sonic Automotive will expand its national footprint to consist of 177 franchises across 125 locations. Following the announcement of the deal, Sonic Automotive’s shares experienced a notable increase, rising nearly 3.5% to reach $82.66.
CEO David B. Smith expressed that the acquisition underscores a long-term commitment to the potential of the Jaguar Land Rover brands, stating that the company recognizes the growth opportunities within this segment. Additionally, integrating the newly acquired luxury dealerships with Sonic’s existing EchoPark used-car division is a key objective, aiming to enhance their collective market presence amidst a rising demand for luxury vehicles.
The acquisition comes at a time when Sonic Automotive has observed significant growth in its Fixed Operations revenue, which encompasses services like repairs and parts, reporting a 12% increase in Q4 2024. Additionally, the company has enhanced its staffing capabilities by adding 335 technicians in 2024, supporting its growing service demands.
Despite facing challenges in its new-vehicle gross profit, which dropped by 25% in 2024, Sonic Automotive has managed to offset these declines with increased margins from Fixed Operations and its used-car segments. The ongoing trend indicates that U.S. luxury car sales are projected to hit 3.2 million units by 2026. This growth is anticipated to be fueled by tech-savvy consumers attracting to premium electric vehicles, aligning well with Sonic’s strategic shift towards luxury markets.
Financial analysts note that Sonic Automotive’s current forward price-to-earnings (P/E) ratio stands at 12x, which is below the industry average of 15x. Analysts have set a 12-month price target for the company’s stock at $75, indicating a potential growth of 25% above its current stock levels, predicated on expectations of margin stabilization and integration synergies from this latest acquisition.
This latest acquisition aligns with Sonic Automotive’s broader strategy of expanding its market reach and improving its service offerings, ensuring that the company remains competitive in the evolving automotive landscape.
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Additional Resources
- Automotive News: Sonic Buys 4 Jaguar Land Rover Stores
- Wikipedia: Sonic Automotive
- PR Newswire: Sonic Automotive Becomes the Largest Jaguar Land Rover Retailer in the US
- Google Search: Sonic Automotive
- Cybersecurity Dive: Sonic Automotive Sales Decline
- Encyclopedia Britannica: Automobile
- Charlotte Observer: What’s in Store for Sonic Automotive
- Google News: Sonic Automotive Acquisition
