EchoPark Used-Car Dealerships Gain Momentum In Q1 For Sonic Automotive

A more ambitious expansion of EchoPark dealerships — a network of used-car-only stores owned by new-car dealership chain Sonic Automotive — is off to a promising start, company executives said.

“We sold almost 20,000 cars,” in the first quarter at EchoPark dealerships, an increase of more than 40% vs. a year ago, said Sonic CEO David Smith, in a phone interview April 29, following up on Sonic’s first-quarter earnings announcement.

The increase is largely because Sonic is adding more EchoPark stores, but Smith said some new EchoPark locations are also reaching operating profits faster than expected. Newly added markets include Phoenix, Birmingham, Ala., and Charleston, S.C.

EchoPark revenues were $507.1 million for the quarter, up 53% vs. a year ago. Pre-tax earnings for EchoPark were $2 million, down 4%.

Sonic, based in Charlotte, N.C., opened its first EchoPark location in late 2014. By early 2020, it still had just nine EchoPark stores, with a five-year goal of at least 25 EchoPark locations.

Then in July 2020, the company announced a much more ambitious game plan. Key parts of the plan are digital selling and marketing, and no-negotiation pricing, which Smith says will beat competing used-car dealerships by $2,500 per vehicle. EchoPark stores also specialize in “nearly-new” used cars, no more than 4 years old, the company says.

As of March 31, Sonic had 21 EchoPark locations, in 11 states. The company opened five of those EchoPark locations in the first quarter of 2021. It plans to open another 20 by the end of 2021.

The new plan is for Sonic to open an average of 25 per year from 2021 to 2025. Ultimately, the company says it wants a total of at least 140 EchoPark stores nationwide by 2025, selling more than 500,000 used cars and trucks annually.

To achieve low pricing, Sonic plans to build greenfield EchoPark dealerships cheaply, and retrofit existing used-car locations and other existing facilities even more cheaply. For example, the company isn’t planning to offer parts and service at EchoPark locations, which saves a lot of start-up costs.

The automakers require franchised, new-car dealerships to offer service, but not independent, used-car dealerships like EchoPark. In markets where Sonic already has new-car dealerships, the plan is for EchoPark stores to refer used-car service customers to Sonic new-car stores for service.

“The idea is, we are building a distribution network that’s very much omni-channel,” Smith said. “It’s going to be an e-commerce experience, where customers will be able to buy online or in-person, whichever they prefer.”