Australia | 11:46 AM
Despite Chinese competition and weaker Australian margins, analysts see long-term value in Eagers Automotive's international expansion, acquisitions and growing electric vehicle exposure.
- Eagers Automotive’s 3Q margin and competition headwinds
- Revenue and margin ‘miss’ consensus estimates
- Offsets from expansion into EVs and emerging brands
- Company should be a long-term beneficiary from industry disruption
By Mark Woodruff
Following a softer September-quarter trading update, it’s clear established brands sold by Eagers Automotive, Australia's largest car retailer, remain under increasing competitive pressure from aggressive Chinese market entrants.
Near-term trading conditions are further challenged by vehicle supply imbalances and weakening consumer demand amid elevated interest rates, persistent inflation, and higher fuel prices.
Fortunately, management’s early expansion into electric vehicles (EVs) and emerging brands over the past five years is cushioning the earnings impact of industry-wide pressures, Canaccord Genuity comments.
The company represents major manufacturers, including Toyota and BYD, while also offering vehicle finance, insurance, accessories and aftermarket services.
Similarly, Moelis considers Eagers Automotive better positioned than peers to withstand industry headwinds, supported by strong demand for BYD’s new energy vehicles (NEVs) and an expected recovery in Toyota sales volumes in the second half.
While Eagers benefits from its BYD exposure, UBS warns emerging Chinese brands Zeekr and Geely could further disrupt the established brands segment, including Mazda, Volkswagen and Honda.
Moelis also sees upside from accelerating industry consolidation, with Eagers well positioned to benefit through its strong balance sheet and joint venture model, which appeals to larger, higher-quality unlisted dealership groups.
Canaccord agrees Eagers is well placed to emerge as a long-term winner from industry disruption, supported by its market share and management expertise.
Management’s revenue guidance of $17.3bn–$17.5bn came in below the consensus estimate of $17.8bn, while underlying profit before tax (PBT) margin guidance of 2.8%–3.0% missed the 3.4% forecast.
Macquarie attributes most of the earnings shortfall against expectations to higher financing costs, followed by weaker sales margins.
Despite near-term industry headwinds, management expects its geographic diversification, productivity initiatives and disciplined capital management to support continued growth.
Eagers also owns a substantial dealership property portfolio, valued at approximately $1.62bn in June 2026.
Acquisitions Reshape Eagers’ Growth Outlook
For the six months ended June 30, Eagers’ two reporting segments, Australia & New Zealand and Canada, accounted for 87.1% and 12.9% of group revenue, respectively.
Only two months of revenue from CanadaOne was included in that period given the acquisition of a 65% controlling interest was completed on 30 April.
Having exceeded third-quarter expectations, this business is now forecast to contribute around 30% of annual group revenue, with further North American expansion opportunities well advanced.
Macquarie sees not only long-term growth potential for CanadaOne but also considers Eagers’ Australian operations undervalued at 13 times prospective earnings.
Morgans explains Eagers remains heavily exposed in Australia to market leaders Toyota and BYD, capturing around 31% of Australian plug-in vehicle sales in the first half of 2026.
Macquarie is positive on the acquisition of a 50% stake in Zagame Group (completion targeted for late November) which expands luxury vehicle exposure, while full ownership of its electric vehicle joint venture (stake increased by 20% in late-October) strengthens exposure to structural growth, particularly through BYD.
The joint venture is EVDealer Group, established in 2022 between Eagers Automotive and EVDirect to operate BYD vehicle dealerships across Australia.
The company divested its New Zealand franchised operations in October.
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