Asbury Automotive plans to grow sales volume — especially in used cars — by growing customer-pay fixed operations, getting more efficient, cutting costs and protecting margins, all at the same time. Dan Clara, Asbury president and CEO, said in an earnings conference call July 28 that a new cloud-based Dealer Management System from Tekion supports this strategy.
“Rolling out a new DMS at this scale is a significant undertaking,” Clara said. So far, Asbury has implemented Tekion’s DMS at 70% of its 158 dealerships, intending to finish the rollout around October of this year.
Tekion, based in Pleasanton, California, replaces Austin, Texas-based CDK Global. CDK suffered a service outage due to a cybersecurity incident in parts of June and July 2024, which all but halted operations temporarily for many dealership groups, including Asbury.
Clara said the Tekion rollout so far shows substantial improvements on several fronts — subject to a break-in period of up to about six months to learn the new system. Simple as it sounds, just having all operations on one computing platform eliminates a lot of time-consuming steps, like a technician having to log into multiple systems over and over, and which may or may not communicate with each other.
Markets that have been on Tekion the longest continue to demonstrate better productivity, stronger customer-pay performance, higher technician efficiency and improving sales effectiveness. Clara put some numbers on the improvements for a subset of Asbury dealerships that had been on the Tekion system for at least five months.
Just looking at the month of June, those stores grew average units per salesperson by 12% and increased the dollars per technician by 10%. These are just a few of the operating metrics Asbury expected to improve as stores mature on the platform.
In the subset of dealerships, the ones that have been on Tekion the longest — about a year — are former Jim Koons Automotive stores, which Asbury acquired in December 2023. Koons Automotive consisted of 20 dealerships in Virginia, Maryland and Delaware, and represented about $3 billion in annual revenues. Other Asbury stores on the Tekion system are in Florida and Georgia.
Clara said in a question-and-answer session with Wall Street analysts that for the quarter, average units per sales manager for the former Koons stores increased 14.2%; average units per F&I manager were up 15.2%. “We’re seeing healthy efficiencies coming from both the variable and the fixed side of it,” Clara said.
Plus, getting Tekion fully rolled out means Asbury can quit paying for two DMS systems. The company said it had $1.2 million in pretax expenses in the second quarter for “duplicative” DMS systems.
In the Q&A, the CEO said Asbury is also thinking ahead to what happens when an expected increase in off-lease vehicles hits the market beginning this year and into the next couple of years.
“I don’t see a negative impact to the gross profit. Now, keep in mind, as we get more aggressive and we go after the volume, there will be an impact on the margins; we’re still going to run a healthy PVR,” Clara said, referring to gross profit per vehicle retailed.
“We have done the stress analysis, and for every additional, call it 500, used cars that we sell, we have the ability to drop about $200, $250 a car. We’re really managing that accordingly to make sure that we get the best return for our shareholders,” he said.
Asbury expects a surge in off-lease inventory. The company intends to manage this volume with the new system.
Car makers race toward an outdated future, a report on industry trends, suggests that the industry is facing challenges similar to those Asbury handles.
Asbury is also working with Ford and GM on new prototype deals for the US Army.
