Houston-based Group 1 Automotive, Inc., an international, Fortune 300 automotive retailer, is a leading operator in the automotive retailing industry. Since its initial public offering in October 1997, Group 1 has grown to become one of the largest dealership groups in the United States and has expanded into the United Kingdom and Brazil. The company has achieved its success through a strategy that leverages management experience and emphasizes geographic and brand diversity, interrelated revenue streams, operational efficiencies and the prudent deployment of capital.
As of December 31, 2019, Group 1 owns and operates 186 automotive dealerships, 242 franchises, and 49 collision centers in the United States, United Kingdom and Brazil. Through its dealerships, the company sells new and used cars and light trucks; arranges related vehicle financing; sells service contracts; provides maintenance and repair services; and sells vehicle parts.
Group 1 operates under a consolidated, regional structure with a strategy that is founded on standardized practices to achieve operating efficiencies, industry-leading customer service, disciplined acquisition growth and diversity in geographic reach and brands marketed. The company's success is attributable to the continued focus on its customers, leveraging its scale, the successful integration of acquisitions and flexible operating model that allows operational decision making to remain close to the market.
Group 1’s operating structure is made up of four core business lines – New Vehicles, Used Vehicles, Parts & Service, and Finance & Insurance – that create a synergistic model.
The company offers 31 brands of New Vehicles to its customers in 50 dealerships in the United Kingdom, 17 dealerships in Brazil, and 119 dealerships across 15 states in the United States. Group 1 prides itself on offering its customers a superior new vehicle buying experience that will bring them back for service and future vehicle purchases. The company made a strategic decision in 2005 to shift its brand mix to include a higher concentration of growing brands, to continue to drive business into Group 1’s higher-margin parts & service centers. While Group 1’s largest offering is Toyota/Scion/Lexus, the company has also grown its Audi, BMW, Jaguar, Land Rover, Mercedes-Benz (Daimler), and Volkswagen offerings significantly over the last few years.
Group 1’s Used Vehicle department carries a vast assortment of vehicles that its customers desire. The company uses a variety of tools that include its experienced sales staff and an intelligent software program. The software program intuitively knows if a vehicle fits into the dealership’s core inventory or may be needed by a another of Group 1’s stores; informs the dealer what the real-time auction rates are so that the vehicle can be accurately priced which increases the chance of a sale being closed; and assists the dealership in managing its used vehicle inventory. In addition, the software makes it possible for regional dealerships to hold internal auctions that have reduced Group 1’s Used Vehicle wholesale business to avoid wholesale losses where retail profits can be made.
Another facet of Group 1’s Used Vehicle business is its Certified Pre-Owned business (CPO) which represents approximately 22 percent of the company’s Used Vehicle retail sales. Group 1’s heavily-weighted import and luxury brand mix has contributed to the increase in CPO sales. These certified Used Vehicles are typically sold with extended warranties that improve customer service retention.
At the time of sale, Group 1’s Finance & Insurance department works diligently to meet the customer’s new or used vehicle purchase objectives. Group 1 has solid relationships with a variety of established lending institutions, allowing the company to place the majority of its customers into loan agreements with acceptable terms. In addition, the company has national agreements with a vehicle service contract (extended warranty) supplier that provides our customers attractive pricing, while leveraging the company’s profits. Group 1 offers a variety of products, such as the vehicle service contracts, gap insurance, tire and window insurance, etc., to its customers using a transparent menu process.
Parts & Service is the core of Group 1’s operations. The company is working on several initiatives to improve customer satisfaction and processes to increase the profitability. Parts & Service accounted for 12 percent of Group 1’s total revenues, but represented 44 percent of the company’s consolidated gross profits in 4Q19. In turn, total company Parts & Service gross profit covered between 90 percent and 95 percent of the total company fixed costs and Parts & Service selling expenses, which affirms Group 1’s strategy to drive business into its service department with new and used vehicle sales.