As the US Q4 earnings season kicks off, listed dealer groups are once again setting the tone for global automotive retail. The early read-across is familiar: revenues remain resilient, margins continue to normalise, and capital discipline is firmly back in focus.

But while the headlines are being written in the US, the implications are not uniform. For UK operators, the macro backdrop, competitive pressures, and M&A dynamics are increasingly distinct – and that divergence matters more with each reporting cycle.

The US reset: from exceptional to sustainable

Across the US, Q4 results are reinforcing a simple truth: the post-COVID era of exceptional, almost lottery-like profitability is over. New- and used-vehicle margins are reverting to mid-cycle norms, SG&A discipline is back under scrutiny, and investors are placing far greater weight on cash flow durability than on peak earnings.

That doesn’t mean the model is broken, far from it. The stronger public groups are demonstrating that scale, after-sales depth and disciplined capital allocation still compound value over time. Share buybacks, selective acquisitions and portfolio pruning are now the dominant strategic levers.

This theme was articulated particularly well in a recent Car Dealership Guy Podcast episode with George Karolis, President of The Presidio Group, who framed the last few years as a structural inflexion point rather than a temporary spike. As dealership profitability surged post-COVID, the industry generated unprecedented liquidity and buying power. That cash is still in the system, and the appetite to acquire has not diminished.

What has changed is buyer behaviour. The market has moved decisively away from paying for headline multiples on peak earnings toward underwriting earnings quality, sustainability, and repeatability.

The UK is not the US – and won’t be

While US earnings dominate the newsflow, the UK market is evolving under a different set of forces.

Most notably, Chinese OEMs are now a structural part of the UK automotive landscape. Unlike the US, where protectionist policies and tariff barriers are reshaping the competitive field, the UK is experiencing direct price-led competition across EV and increasingly ICE-adjacent segments.

This has three important implications for UK dealer groups:

First, margin pressure is structural, not cyclical. Pricing discipline is more challenging to maintain when new entrants are willing to trade margin for market share and brand establishment.

Second, capital intensity is rising. Franchise requirements, EV infrastructure investment, and working capital demands are increasing even as returns on incremental volume are compressing.

Third, scale alone is no longer sufficient. Operational excellence, local market execution and fixed ops performance are becoming the true differentiators.

In that context, UK strategies focused on optimisation rather than expansion are not defensive – they are rational.

After-sales and productivity are the real moat.

One consistent theme across both markets is the growing importance of after-sales and productivity.

As retail margins normalise, parts and service remain the most stable and counter-cyclical profit pools. Fixed absorption, service retention and technician productivity are no longer hygiene factors; they are core valuation drivers.

Technology also plays a bigger role than ever. Data-driven pricing, marketing efficiency, AI-enabled customer handling, and workflow automation are increasingly what set sustainable operators apart from those reliant on favourable market conditions.

This aligns with Karolis’ observation that, for the 3,400 remaining single-store owners, survival and valuation will increasingly hinge on the strength of fixed ops and tech-enabled efficiency, not just franchise badges or geographic coverage.

M&A: active, but far more selective

Despite more challenging conditions, the M&A market remains active on both sides of the Atlantic.

Public dealer groups have deployed tens of billions of dollars since COVID, and that capital continues to seek a home. However, the underwriting lens has tightened materially. Buyers are focused on:

• Normalised, defendable earnings
• Cash conversion and working capital discipline
• Management depth and operational repeatability

In the UK, this means fewer “financial engineering” deals and more emphasis on strategic fit, integration potential and downside protection. Vendors anchored to 2021–22 valuation benchmarks are finding the gap to today’s reality harder to bridge.

Importantly, this is not a collapse in asset demand – it is a recalibration of what constitutes quality.

The bigger picture

The early stages of US Q4 reporting underline a broader industry transition. Automotive retail is moving from an era defined by exceptional tailwinds to one shaped by capital discipline, operational rigour and sustainable returns.

For UK operators, the challenge is sharper. Chinese competition, regulatory pressure and margin compression mean strategies must be clearer and execution tighter. But the opportunity remains for those who adapt early, invest intelligently and focus on earnings quality rather than scale for its own sake.

As always, full credit to Car Dealership Guy and the recent podcast with George Karolis of The Presidio Group for framing many of these dynamics so clearly. With NADA just around the corner, these themes will no doubt dominate conversations in Las Vegas.

Have a great week!