Warren Buffett Gets in the Car Dealership Business

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Warren Buffett is on the move again. Thursday morning he announced that Berkshire Hathaway Inc. (NYSE: BRK-A) had entered a definitive agreement to acquire the Van Tuyl Group. The transaction is expected to be completed in the first quarter of 2015. The Van Tuyl Group has over $8 billion in revenue and has 78 independently operated car dealerships spanning 10 states. The company’s site talks about its presence in Arizona, Kansas and Texas.

The Van Tuyl Group was founded in 1955 by Cecil Van Tuyl who would later pass the mantle to his son, Larry Van Tuyl. In the United States, the company is the largest privately owned auto dealership group, ranking fifth among all auto dealership groups.

The company will change its name to Berkshire Hathaway Automotive and will retain Larry Van Tuyl as chairman. Jeff Rachor will assume the position of CEO. Berkshire Hathaway Automotive will be headquartered in Dallas, Texas.

To show just how much this industry can consolidate, we included a historical dealer count from the National Automobile Dealers Association (NADA). The number has declined steadily through time, but there is still a massive opportunity for consolidation here.

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Warren Buffett commented on the transaction:

The Van Tuyl Group fits perfectly into Berkshire Hathaway from both a financial and cultural viewpoint. Larry Van Tuyl along with his father, Cecil, spent decades building outstanding dealerships operated by local partners. In recent years, he has shared management with Jeff Rachor, a seasoned auto retailer who will retain a financial interest in all dealerships. This is just the beginning for Berkshire Hathaway Automotive.

Number of Franchised New-Car Dealerships (NADA), by Year and by count

1947  45,500
1948  46,000
1949  49,200
1950  47,000
1951  47,500
1952  46,000
1953  45,200
1954  41,900
1955  40,400
1956  41,000
1957  40,000
1958  37,300
1959  36,400
1960  35,000
1961  34,500
1962  34,200
1963  33,700
1964  33,500
1965  33,700
1966  32,900
1967  32,000
1968  31,100
1969  31,000
1970  30,800
1971  30,300
1972  30,100
1973  30,100
1974  30,000
1975  29,600
1976  29,300
1977  29,100
1978  29,000
1979  28,500
1980  27,900
1981  26,350
1982  25,700
1983  24,725
1984  24,725
1985  24,725
1986  24,825
1987  25,150
1988  25,025
1989  25,000
1990  24,825
1991  24,200
1992  23,500
1993  22,950
1994  22,850
1995  22,800
1996  22,750
1997  22,700
1998  22,600
1999  22,400
2000  22,250
2001  22,150
2002  21,800
2003  21,725
2004  21,650
2005  21,640
2006  21,495
2007  21,200
2008  20,770
2009  20,010
2010  18,460
2011  17,700
2012  17,540