AutoNation, the largest automotive retailer in the United States, reported a decline in fourth-quarter vehicle sales, a trend echoed by peers, as the industry faced challenging comparisons to a strong 2024 and the impact of shifting consumer behavior related to tariffs and expiring electric vehicle incentives. The company, however, highlighted strong performance in its after-sales and finance divisions, offsetting some of the pressure from new vehicle sales.
AutoNation reported that fourth-quarter revenue reached $6.9 billion, a 4% decrease compared to the same period last year. While full-year revenue increased 3% to $27.6 billion, the fourth-quarter slowdown underscores a broader cooling in the automotive market. Adjusted earnings per share (EPS) for the quarter came in at $5.08, up 2% year-over-year, and $20.22 for the full year, a 16% increase.
Sales Impacted by Multiple Factors
According to AutoNation CEO Mike Manley, the decline in sales was attributable to a combination of factors. A surge in sales following the election, which drove a seasonally adjusted annual rate (SAAR) of 16.7 million light vehicles in the fourth quarter of 2024, created a difficult comparison for the current year. Consumers accelerated purchases in anticipation of announced tariffs and the expiration of federal tax credits for electric vehicles, pulling demand forward into earlier periods.
“Relative to the fourth quarter, the industry faced tougher sales comparisons to last year, when post-election sales surged,” Manley stated during the earnings call. He further explained that the “strong pull ahead earlier in the year, as consumers reacted to the tariff announcements and purchased vehicles prior to the expiration of government incentives for electric-related powertrains” negatively impacted fourth-quarter results.
The impact wasn’t uniform across all brands, with premium luxury vehicles experiencing the most significant declines. Same-store new vehicle unit sales fell 10% year-over-year, with battery electric vehicle (BEV) sales down approximately 60% and hybrid vehicle sales down 10%. This contributed roughly half of the overall decline in new vehicle sales.
Bright Spots in After-Sales and Finance
Despite the challenges in new vehicle sales, AutoNation demonstrated resilience in other areas of its business. After-sales revenue and profit both reached record highs for both the quarter and the full year, with same-store gross profit up 6% for the quarter and 7% for the year. This segment, which includes vehicle maintenance, repairs, and parts sales, continues to be a key driver of profitability for the company.
Customer Financial Services (CFS) also performed strongly, with gross profit per unit up 8% from the prior year and 4% sequentially, reaching a record high. AN Finance, AutoNation’s financing arm, swung to a $10 million operating profit, with originations reaching $1.76 billion. The company’s portfolio grew to $2.2 billion while improving profitability and funded status.
Industry-Wide Trends
AutoNation’s experience reflects broader trends within the automotive industry. Group 1 Automotive reported a 4% year-over-year decline in same-store new vehicle sales and a 2% decrease in same-store used vehicle sales during the fourth quarter, mirroring the overall U.S. Market performance. Asbury Automotive Group experienced even steeper declines, with same-store new vehicle sales down 6% and used vehicle sales down 10%.
The surge in electric vehicle sales leading up to the expiration of the $7,500 federal tax credit in significantly impacted sales patterns throughout the year. Prior to that, auto sales had also spiked in as consumers reacted to impending tariffs, before returning to more normal levels.
Capital Deployment and Outlook
AutoNation demonstrated a commitment to returning capital to shareholders, spending $785 million on share repurchases during the year, reducing the share count by approximately 10% at an average price of $193 per share. Adjusted free cash flow exceeded $1.05 billion for the year, representing 125% of adjusted net income.
While management expressed confidence in the company’s performance, they also cautioned about the outlook for . The company expects after-sales to continue growing in the mid-single digits, but is approaching the new year cautiously, acknowledging the ongoing uncertainties in the macroeconomic environment and the evolving dynamics of the automotive market. The company’s ability to navigate these challenges and capitalize on the strength of its after-sales and finance businesses will be crucial to its continued success.
