The president of Sonic Automotive Inc., a prominent auto dealership in the United States, recently acknowledged Tesla’s disruption of the country’s car industry as a reason behind headwinds faced by the network in the past quarter. While answering inquiries during Sonic’s Q4 2018 earnings call, Jeff Dyke, the company’s president, noted that Tesla and the rise of the Model 3 played a role in the weakening sales of brands such as BMW, especially in areas such as California.
Sonic Automotive Inc. is the fifth-largest auto dealership in the United States, with other 100 locations representing 24 brands across the country. Despite its wide reach, Sonic’s fourth-quarter results missed analysts’ estimates. Addressing its Q4 miss, Dyke noted that the past quarter has been rough on brands such as BMW, which has a number of dealerships in California — a region that houses Tesla’s headquarters and arguably the largest market for the Model 3 in America.
Responding to an inquiry from Morningstar analyst David Whiston, who asked if the rise of the Model 3 was a factor in the headwinds faced by BMW last quarter, Dyke candidly admitted that “there’s no question” the electric sedan played a major role in the challenges faced by the German carmaker. The Sonic Automotive president also noted that despite Tesla’s shortcomings, the company just keeps selling cars.
“There’s no question. I mean — they’re calling out to sell well over 300,000 cars this year; they sold a lot of cars last year. I can tell you that I’ve spent a lot of time in manufacturer meetings, and five years ago, Tesla was just not even a real big topic. And today, it’s the top of everybody’s board, and it needs to be. They’re selling a lot of cars.
“And until BMW — I think Audi is really doing a good job coming out with products — but until the manufacturers come with the line-up to deal with them, you can say all you want about their service problems and all of this; they’ll just keep selling more cars. My hat’s off to them — they’re selling a lot of cars, and there is no question in California that it’s getting in our shorts.”
Credit must be due to the Sonic Automotive Inc. president for recognizing the inconvenient truth that is Tesla and the disruption being brought about by the rise of the Model 3. Over the past year, Tesla transitioned from a company that could barely produce 2,000 Model 3 a week to a carmaker that delivered more than 140,000 units of the electric sedan by the end of 2018. Also notable is that the Model 3 made such an impact in the United States despite the country usually preferring larger vehicles like pickups and SUVs over passenger cars.
With even more affordable Model 3 variants in the horizon, such the still-elusive $35,000 base variant, established dealers such as Sonic Automotive and brands such as BMW might see even more challenging times ahead.