Eagers Automotive is making significant strides in the used car market by adopting a strategy reminiscent of the Bunnings retail model, characterized by a national brand presence and a low-price guarantee. This approach is starting to yield positive results for the company, particularly in an industry grappling with consumer skepticism. Recently, Eagers gained attention for acquiring a 65 percent stake in the Canadian business CanadaOne, marking its first major venture beyond Australia.
While the acquisition underscores Eagers’ international ambitions, the company is also keen on expanding within Australia. The firm’s used car division, Easyauto123, reported a remarkable 33 percent increase in profits for the half-year period ending June 30. This growth reflects the effectiveness of its warehouse-style showrooms and distinctive branding, which includes bold yellow, black, and red signage, resonating with customers a decade after its establishment.
Keith Thornton, Eagers’ Chief Executive, has outlined plans to open an additional six outlets over the next year. This expansion will add to the existing 13 sites across Australia and three in New Zealand, collectively selling over 20,000 used cars annually. Easyauto123 was integrated into Eagers following the acquisition of ASX-listed AHG in 2019, when it was incurring annual losses of $5 million. Recent market conditions, however, have shifted in its favor, with rising cost-of-living pressures prompting more consumers to consider used vehicles.
The Australian used car market shows signs of resilience, and Eagers is preparing for further growth. The company is reportedly set to list on the ASX, with joint lead managers already engaged in this process, according to The Australian Financial Review. Eagers holds a 14 percent share of the new vehicle market, selling popular brands such as Toyota, Ford, Hyundai, BMW, and China’s BYD. The company’s shares have performed strongly, tripling in value since the beginning of the year, partly driven by robust demand for the competitively priced BYD vehicles, which account for 80 percent of all BYD sales in Australia.
The announcement of the Canada acquisition further boosted Eagers’ stock, which surged 19 percent last week, closing at a record $33.80. Analyst Peter Marks from Barrenjoey described Easyauto123 as a “hidden gem” within Eagers, highlighting its expanding presence and strategic links to the parent company’s new car dealerships, which allow access to a broader range of vehicles than many competitors.
In terms of profitability, Easyauto123 reported a net profit of $1,526 per vehicle, an increase from $1,251 the previous year, compared to a loss of $704 per vehicle six years ago. This equates to an estimated annual profit of around $30 million from the division. The company is benchmarking itself against CarMax, a NYSE-listed company valued at $13.6 billion, which generated a profit of $973 per vehicle.
Looking ahead, Scott Murdoch, an analyst at Morgans, noted that Easyauto123 is expected to enhance its footprint by 30 percent, with management considering both domestic and international expansion for the model.
Despite a slight dip in overall used car sales, down 1.3 percent to 203,480 in August compared to July, the market remains competitive. The average time for vehicles to sell decreased to 43.9 days, down from 44.6 days the previous month, marking the fifth consecutive month of decline in this metric. According to the Australian Automotive Dealer Association, the reduction in average days to sell indicates strong consumer demand when vehicles are priced competitively.
In conclusion, Eagers Automotive’s strategic expansion through Easyauto123 and its innovative approach to used car sales are positioning the company as a formidable player in the automotive market, both domestically and internationally. The combination of effective branding, competitive pricing, and technological enhancements in pricing strategies is likely to continue driving its growth in the months to come.
