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SEC Filings

PENSKE AUTOMOTIVE GROUP, INC. filed this Form 10-K on 02/24/2017
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For consumer customers, PTL provides short-term rental of light and medium duty vehicles on a one-way and local basis, typically to transport household goods. Customers typically include local small businesses and individuals seeking a do-it-yourself solution to their moving needs. PTL’s fleet consists of late model vehicles ranging in size from small vans to 26-foot trucks, and its consumer rentals are conducted through approximately 1,870 independent rental agents and approximately 350 of its company-operated leasing and rental facilities. PTL’s consumer business generated 7% of its operating revenue for 2016.


Logistics.  PTL’s logistics business offers a broad variety of services, such as dedicated contract carriage, distribution center management, transportation management, freight brokerage and lead logistics provider. PTL coordinates and provides services for its customers across the supply chain, including: inbound material flow, handling and packaging, inventory management, distribution and technologies, and sourcing of third-party carriers. These offerings are available individually or on a combined basis and often involve its associates performing services at the customer’s location. By offering a scalable series of services to its customers, PTL can manage the customer’s entire supply chain or any stand-alone service. PTL also utilizes specialized software that enables real-time fleet visibility and provides reporting metrics, giving customers detailed information on fuel economy and other critical supply chain costs. PTL’s logistics business generated 23% of its operating revenue for 2016.


Industry Information


Retail Automotive Dealership. Approximately 59% of our retail automotive dealership revenues are generated in the U.S., which in 2016 was the world’s second largest automotive retail market as measured by units sold. In 2016, sales of new cars and light trucks were approximately 17.5 million units, an increase of 0.3% from 2015, and were generated at approximately 18,000 franchised new-car dealerships. According to the latest available data from the National Automobile Dealers Association, dealership revenue is derived as follows: 58% from new vehicle sales, 31% from used vehicle sales and 11% from service and parts sales. Dealerships also offer a wide range of higher-margin products and services, including extended service contracts, financing arrangements and credit insurance. The National Automobile Dealers Association figures noted above include finance and insurance revenues within either new or used vehicle sales, as sales of these products are usually incremental to the sale of a vehicle.


In the U.S., the franchised automotive dealer industry is the largest retail business by revenue, with virtually all new cars and light trucks bought in the U.S. through franchised dealers in a market in excess of $1.0 trillion. Publicly held automotive retail groups account for less than 10% of total industry revenue. Although significant consolidation has already taken place, the industry remains highly fragmented, with more than 90% of the U.S. industry’s market share remaining in the hands of smaller regional and independent players. Our other markets are similarly fragmented. We believe that further consolidation in these markets is probable due to the significant capital requirements of maintaining manufacturer facility standards and the limited number of viable alternative exit strategies for dealership owners.


Our European markets consist of Germany, the U.K., Italy, and Spain, which represented the first, second, fourth, and fifth largest automotive retail markets, respectively, in Western Europe in 2016, and accounted for approximately 65% of the total vehicle sales in Western Europe. Unit sales of automobiles in Western Europe were approximately 14.0 million in 2016, a 5.8% increase compared to 2015. In Germany, the U.K., Italy, and Spain, new car sales were approximately 3.4 million, 2.7 million, 1.8 million and 1.1 million units, respectively, in 2016. 


We also own a 49% interest in a Japanese joint venture. Unit sales in Japan were 4.8 million in 2016, a decrease of 3.1% from 2015, though sales in the luxury segment remained strong.


As noted above, in January 2017, we acquired CarSense, a used vehicle retailer operating five locations in Pennsylvania and New Jersey. Used vehicle sales in 2016 in the U.S. were approximately 40 million units in 2016. Used vehicle sales are even more fragmented than new vehicle sales and are generated by new car dealerships, used vehicle “superstores,” individual small lot sellers, as well as individual to individual sales.


Retail Commercial Truck Dealership. In 2016,  North America sales of Class 5-8 medium and heavy-duty trucks, the principal vehicles for our PTG business, were approximately 484,100 units, a decrease of 9.9% from 2015.  The Class 5-7 medium-duty truck market increased 3.2% to 234,200 units from 227,000 units in the same period in 2015. The largest market, Class 8 heavy-duty trucks, decreased 19.4% to approximately 249,900 units from approximately 310,000 units