Continued from our series on  “How Dealers Profiting on Wholesale”, here is an article from Automotive News regarding AutoNation’s Plan to add five more auctions.

AutoNation to leap into auction business

• By Amy Wilson, www.autonews.com
• View Original
• November 28th, 2016

FORT LAUDERDALE — With plans for five AutoNation-branded auto auctions within two years, AutoNation Inc. intends to auction the vast majority of its wholesale vehicles on its own, making a major break from Manheim.

“It’s just a natural transition and natural business for us,” AutoNation COO Bill Berman said. “We’re the largest automotive retailer. We have vehicles that don’t make sense for us to retail. Why use a middleman if you don’t have to?”

AutoNation, the country’s largest new-vehicle retailer, already has experience in the auction business. It has owned and operated Prime Auto Auction for more than 18 years in Los Angeles. That auction sells 25,000 vehicles annually. It was rebranded with the AutoNation name in October.

The Los Angeles auction “has given us the experience to make us comfortable moving ahead with other auctions,” said Phillip Chavka, AutoNation’s vice president of used-vehicle operations.

In addition to the L.A. location, the company’s auction expansion will start with new locations in Orlando and Houston in the first quarter of 2017. One in Atlanta will open in the second half of the year. The location of the fifth site was not announced.

AutoNation expects to sell more than 20,000 vehicles annually at each of its auction locations. Lewis Beshoff, who had been heading the Los Angeles auction, will be the company’s senior director of auction operations.

AutoNation CEO Mike Jackson said the California auction has been “very profitable” and he expects the entire auction operation being launched “will be profitable in and of itself.”

The auction expansion is part of a $500 million brand-extension strategy announced in October. It includes opening a network of AutoNation USA used-vehicle stores, introducing AutoNation-branded parts and accessories, and expanding the company’s collision business.

The AutoNation auctions will work to bring in business from other retailers looking to wholesale vehicles. The Los Angeles site is a perfect example, Berman said. More than 60 percent of the vehicles that go through that location come from outside groups, some even from other publicly owned retailers, he said.

“It’s of a different size and scale,” Berman said. “They can get priority treatment.”

The L.A. auction typically runs four to six lanes of vehicles, vs. the 20 lanes or so that are common at the big auctions, he said.

Across the entire auction network being planned, 65 to 70 percent of the cars to be sold will be AutoNation’s vehicles, Beshoff told Automotive News.

AutoNation will continue to use Manheim in markets where it doesn’t make sense to ship wholesale vehicles to its own auctions, Berman said. He included Denver, Chicago and Cleveland as examples. But that may not be the case for the long term.

“As our density grows, as our USA store opportunities grow, we’ll look at other places to put auctions as well,” Berman said.

James B. Treece contributed to this report.