Business model of AutoNation

Customer Segments

Autonation operates a range of automotive retail outlets. The Company primarily serves a range of customers from the general consumer market, across its three operating divisions. Autonation sells new and used cars, with used cars targeted at less affluent, lower income customers, to which the Company also provides financing services. The Company also offers a range of imported premium luxury vehicles, which are targeted at more affluent, middle and upper class consumers who have a more disposable income.

Autonation also operates a wholesale parts unit, which sell automotive parts and accessories to collision repair shops, and independent vehicle repair businesses. Currently, Autonation operates exclusively in the US, in particular serving the major markets in the Sunbelt region

Value Propositions

Autonation provides value to its customers in the following ways:

• Its broad portfolio of products, with the Company offering a broad range of vehicles from domestic and international brands – including high-end premium brand such as Porsche – as well as various accessories;
• Its suite of integrated and value-added services, with the Company providing a range of ancillary and supplemental services, such as auto financing, insurance, and parts distribution;
• Its domestic reach and accessibility, with the Company operating a broad network of retail outlets across the US, as well as operating certain online channels;
• Its competitive pricing model, with the Company providing new and used vehicles at reasonable and competitive price points; and
• Its industry expertise and experience, with the Company employing specialist staff across its three operating segments, as well as experienced industry executives.

Channels

Autonation operates a website at www.autonation.com, through which it provides information on its various products, services, and locations. The Company also operates an online channel that allows customers to browse the Company’s catalogue of vehicles, browse protection plans, initiate the auto financing process, and obtain a trade-in appraisal.

Autonation employs a team of trained auto sales staff, who serve customers directly through the Company’s retail outlets. According to its annual report, the Company operates a network of 342 new vehicle franchises from 254 stores located in the US, as well as collision repair centres, display lots, and service facilities, through which it sells vehicles and parts, and provides maintenance and repair services. Any used cars that are not sold through the Company’s franchises and showrooms, are sold at public auctions.

Additionally, Autonation operates a specialist wholesale auto parts division, which serves auto repair shops through a dedicated sales team.

Customer Relationships

Autonation operates several online channels via its website that allow customers to access services on a self-service basis. These portals enable customers to browse the Company’s full inventory of vehicles, browse protection plans, arrange service appointments, initiate the auto financing process, and obtain a trade-in appraisal independently, without interacting with members of the Company’s sales and marketing teams.

Through its network of facilities and retail outlets, Autonation’s sales and support personnel provide direct personal service to customers, providing in-person advice and assistance on different vehicles and service options. With its facilities spread across the US, concentrated particularly across the country’s sunbelt, the Company’s seeks to provide services to customers locally. The Company also works closely with its wholesale customers, with a view to establishing longstanding relationships and recurring business.

Autonation provides a significant amount of information to customers on its website, including guides to insurance and financing. Customers are also able to contact with the Company directly over the phone and online, as well as through the Company’s social media accounts, including with Facebook and Twitter.

Key Activities

Autonation operates as an automotive retailer across the US. The Company offers a range of automotive products and services, including new and used vehicles, auto parts and servicing – including repair and maintenance services – as well as operating a wholesale parts distribution unit. Additionally, the Company provides ancillary insurance and auto financing services, including acting as an intermediary between customers and third-party finance businesses.

Autonation’s operations are organised into three business segments: Domestic, comprising sales of domestic vehicle models; Import, comprising the sale of imported vehicle models; and Premium Luxury, comprising the sale of luxury imported vehicles. The Company’s vehicle catalogue includes 35 different new vehicle brands, including Buick, ford, BMW, Mercedes, Porsche, Jaguar, Chrysler, and Mazda.

Key Partners

Autonation works in conjunction with a range of companies and organisations, in order to provide an efficient and reliable service. These partners can be categorised broadly as:

• Supplier and Vendor Partners, comprising suppliers of vehicles, parts, and accessories which are resold via the Company’s retail outlets and service facilities, as well as suppliers of services and technologies that are utilised across the Company’s operating segments;
• Financing and Insurance Partners, comprising various financial services and insurance operators, with which the Company works to provide financing and insurance packages to its customers;
• Distribution Partners, comprising various delivery and logistics providers that assist in distributing the Company’s product, largely in relation to its wholesale parts business; and
• Strategic and Alliance Partners, comprising a range of companies and organisations with which the Company collaborates on joint projects.

Autonation has launched a number of partnerships in recent years. This includes a deal with TrueCar, with which its shares data and resources; a partnership with aftermarket tuning house Hennessy to jointly provide performance upgrades to Autonation customers; and tie-up with Black Book, which provides valuation data for the Company’s online portal.

Key Resources

Autonation’s key resources are its catalogue of vehicles and accessories, its supply chain, its online platforms and IT infrastructure, its network of retail and service outlets, its partnerships, and its personnel.

Autonation’s operations depend in large part on its network of owned and leased properties across the US, including display lots, showrooms, supplies facilities, and service centres. These facilities are located across 15 states: Alabama, Arizona, California, Colorado, Florida, Georgia, Illinois, Maryland, Minnesota, Nevada, Ohio, Tennessee, Texas, Virginia, and Washington.

Cost Structure

Autonation incurs costs in relation to the procurement of vehicles and accessories, the management of its supply chain, the development of its online platforms, the maintenance of its IT infrastructure, the operation of its retail and service outlets, the implementation of advertising and marketing campaigns, the management of its partnerships, and the retention of its personnel.

In 2015 Autonation recorded selling, general, and administrative expenses in the amount of $2.26 billion, including store and corporate salaries, commissions, and incentive-based compensation, as well as advertising and corporate overhead expenses, which include occupancy costs, legal, accounting, and professional services fees.

Revenue Streams

Autonation generates revenue through the sale of new and used cars, accessories, and parts, as well as the provision of repair and maintenance services. The Company also generates a small portion of its revenue through the provision of ancillary financing and insurance services.

In 2015 Autonation generated annual revenue of $20.86 billion, up on the $19.10 billion recorded by the Company in 2014. Approximately 57% of the Company’s total revenue was derived from sales of new cars, while approximately 23% of our total gross profit was derive from sales of used vehicles. Revenue was distributed relatively evenly across the Company’s three operating segments, with the Domestic, Import, and Premium Luxury segments generating $7.07 billion, 7.04 billion, and $6.61 billion respectively.