Friday, December 3rd, 2021

Morgan Stanley report triggers drop in auto dealer group stocks such as Penske, AutoNation

Stock prices for public dealership groups took a hit Wednesday after Morgan Stanley equity analyst Adam Jonas released a research note expressing caution about the group.

In his report, Jonas downgraded Penske Automotive Group Inc. and Sonic Auto Inc. “as a reflection of secular industry headwinds despite peak earnings.”

On Wednesday, share prices fell by 10.4 percent for Penske, 8.6 percent for Sonic, 11.5 percent for Group 1 Automotive Inc., 9.7 percent for AutoNation Inc., 9.0 percent for Lithia Motors Inc., and 8.5 percent for Asbury Automotive Group Inc., according to MarketWatch. Share prices for those companies had recovered somewhat by Thursday afternoon.

Jonas expressed concerns about the pressure franchised dealerships face as Tesla Inc. and other EV makers expand and likely increase the volume of direct-to-consumer vehicle sales. EV startup Rivian also is planning direct sales and Vietnamese startup VinFast recently said it plans 60 direct-to-consumer EV dealerships in California.

The Morgan Stanley report positioned the inability of legacy automakers to control the consumer experience in a direct-sales model as one of the biggest threats facing automakers — “even bigger than the threat of electrification itself.”

He acknowledged that it’s a “highly complex issue” involving regulatory, legal and even social factors that could take years to play out.

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