APE: At a cyclical low point?

Sometimes when investing it pays to ignore the short term headlines and go against the prevailing sentiment. Car retailing is a business that has been around for well over a century. In Australia, one of the largest, and oldest car retailers is Eagers Automotive (ASX:APE). They were founded in 1913 and listed in 1957. Today they have a market capitalization of over $3.1 billion and turnover exceeding $10 billion. They are the number one new car retailer with over 10% market share and the number one used car retailer.

So they know how to sell cars. That said, new vehicle sales in Australia are currently under a bit of pressure. The Australian Financial Review reported that at a car dealer’s conference in July, dealers were concerned that conditions were getting considerably worse. Inquiries were down 30% and orders were down 10%. Margins had fallen nearly 20% and were expected to fall further.

This fear has been borne out. According to the Federal Chamber of Automotive Industries (FCAI) new vehicle sales slumped 11.6% in November compared to November 2023. Furthermore, since July, sales have declined 8.2% when compared to the same period last year. It is even worse...