In my perpetual quest to answer the question "what does this news mean to B'game?" today's chapter deals with the news that Warren Buffett's Berkshire Hathaway investment company just agreed to buy the country's fifth-largest auto retailer as a basis to "roll-up" the fragmented car dealership market. Simultaneously "AutoNation and Lithia Motors have been snapping up smaller retail chains, often run by families who have been selling cars for generations." according to the WSJ.
Car retailing is very, very, shall I add a third "very" important to B'game. It was the leading sales tax generator in Q1 as you can see on the City website here. About $900K came in that quarter and even with lines around the corner at the Apple store for the iPhone 6, it will take a lot of phones to come close to that.
The Journal notes "there were almost 17,700 new-vehicle dealerships operating in 2013, of which more than half sell fewer than 400 units a year. The average profit margin for them was a princely 2.2% -- pretax." Couple that with Tesla's non-dealership sales model where the sales tax goes to the city where the buyer lives not the city where it was sold and there are changes afoot. Should be interesting to see if the robust Peninsula economy keeps car selling local or if the Oracle of Omaha will move into B'game. In the meantime, shop B'game.
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