WHY LANDMARK CARS IS IN A SWEET SPOT

Premium positioning in a booming car market and a superior management structure make Landmark Cars - The Next 500 topper - a cut above the rest in a low-margin dealership business.

-  V. Keshavdev

FOR ALL THINGS capitalist in the U.S., auto dealers have a strong safeguard cushioned by an array of state-level legislations, including the one that prohibits manufacturers from terminating franchises at free will unless they prove they have a "good cause" to do so. The dichotomic interplay of free enterprise and state-protected commerce makes the 18,000 new-car dealerships, under the ambit of the National Automobile Dealers Association (NADA), a strong lobby that automakers cannot roughshod over.

Hence, it's not surprising to see the top 20 dealers command $100 billion in combined market cap in the U.S., where 15.6 million new vehicles were sold in 2023, 12% higher over CY22, marking the biggest increase in more than a decade. While the top four are predominantly online used-car dealers, the 300-outlet-strong AutoNation is the biggest pure-play brick-and-mortar retailer with a market value of $5.87 billion. The company ranks 151st on the global Fortune 500 list with sales of $20 billion and $800 million in profits (9MCY23).

Now contrast that with India, a so-called mixed economy, where the Federation of Automobile Dealers Associations represents the interest of over 15,000 dealers but lacks the state-level laws that their counterparts in the U.S. enjoy. In other words, auto dealers are more at the mercy of the OEMs who can throw out a non-performing or a weak dealer-cum-service franchisee without worrying about any legal consequences.