Penske (PAG) Q1 2026 Earnings Call Transcript

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Date

Wednesday, Apr. 29, 2026 at 2 p.m. ET

Call participants

• Chair and Chief Executive Officer — Roger S. Penske
• Executive Vice President and Chief Financial Officer — Shelley Hulgrave
• Executive Vice President, North American Operations — Richard P. Shearing
• Executive Vice President, International Operations — Randall Seymore
• Vice President and Corporate Controller — Tony Piccione
• Executive Vice President, Investor Relations — Anthony R. Pordon

Takeaways

• Total revenue -- $7.9 billion, derived from over 123,000 new and used vehicle deliveries and nearly 3,600 new and used commercial truck sales.
• Net income -- $235 million reported; adjusted for a $60 million gain on a dealership sale and $13 million in charges, adjusted net income was $201 million.
• Earnings per share -- $3.56 GAAP and $3.05 adjusted for one-time items.
• EBT -- $324 million; adjusted EBT was $276 million after excluding one-time items.
• New retail automotive same-store units -- Declined 5%, while same-store used units increased 1%.
• Gross profit per new retail unit -- $4,783, up $94 sequentially from Q4 2025.
• Gross profit per used retail unit -- $2,076, a sequential increase of $306.
• Service and parts revenue -- Same-store revenue increased 4.6%; related gross profit grew 5.7% and gross margin expanded by 0.6 percentage points.
• Retail commercial truck segment -- Q1 unit sales fell 9% to 3,583 units due to prior period tariff effects and freight market weakness; sequentially, new truck gross profit rose by $111 and used by $4,624.
• Penske Transportation Solutions (PTS) equity income -- Increased 24% to $41 million, with a 4% decline in PTS operating revenue, 2% rise in lease revenue, 17% rental revenue decrease, and 3% logistics revenue decline.
• International revenue -- $3.3 billion, up 6%; international new unit sales increased 2% and used unit sales increased 3%.
• U.K. automotive registrations -- Increased 6% to 615,000; new unit deliveries were flat, but same-store used units rose 3% and sequential gross profit per unit increased $500.
• Australia EBT -- Increased 15%, with pre-owned and aftersales performance offsetting a Macan model transition affecting new sales.
• Commercial vehicle and power system business (Australia) -- Revenue and gross profit split about two-thirds off-highway and one-third on-highway; secured orders exceeded A$600 million for 2026.
• SG&A expenses -- Increased 1.5% (below the inflation rate); SG&A as a percentage of gross profit was 74.3% GAAP and 73.3% adjusted.
• Cash flow from operations -- $215 million.
• EBITDA -- $397 million reported.
• Capital expenditures -- $63 million invested, down from $85 million in the prior period.
• Dividend -- Increased to $1.40 per share with a 3.4% yield and a 39% payout ratio over the past twelve months; twenty-first consecutive quarterly increase.
• Share repurchases -- 170,000 shares repurchased for $26 million; $221 million remains available for future repurchases.
• Non-vehicle long-term debt -- $2.6 billion at quarter end; leverage ratio of 1.8 times.
• Inventory -- $4.9 billion in total inventory, $77 million higher from December 2025; new vehicle days supply at 44 days, premium at 46, volume at 29; used vehicle supply at 39 days overall.
• Cash and liquidity -- $84 million in cash and $1.2 billion total liquidity reported at quarter end.
• Weather impact -- Two major winter storms caused a $6 million impact to earnings, including $4 million to $5 million from fixed gross loss.
• Acquisitions -- Added two Lexus dealerships in Orlando, adding $450 million in estimated annualized revenue; combined with recent Lexus and Toyota acquisitions, six stores now expected to generate $2 billion in annualized revenue.
• Portfolio optimization -- Sold select locations, generating $325 million to $350 million in free cash flow, and redirected capital to higher-return acquisitions.
• Chinese brands in international markets -- Represent about 23% share in Australia; early results in the U.K. and Germany show higher gross profit per unit compared to used vehicles in Sytner Select stores.

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Risks

• Chair and CEO Roger S. Penske noted, "challenging market conditions impacted year-over-year performance," and same-store new retail automotive units declined 5% amid adverse weather and regulatory changes.
• Net income and EPS may not be directly comparable to the prior year due to the acquisition of Penske Motor Group and associated tax status changes, with the effective tax rate up by approximately 1 percentage point and EPS affected by $0.05.
• Retail commercial truck segment unit sales fell 9% due to weak order intake stemming from tariffs and ongoing freight market softness.
• International operations, specifically in the U.K., remain pressured by "inflation, higher taxes, consumer affordability, and the government mandate towards electric," potentially dampening future demand as emphasized by Randall Seymore.
• Same-store service and parts revenue in the U.K. increased 7% as a 10% increase in customer pay more than offset a 3% decline in warranty.
• EV sales fell 61% compared to last year, and Executive Vice President, North American Operations, Richard P. Shearing commented, "I do not see a material change for BEVs for the balance of the year," reflecting muted near-term outlook for BEV recovery.

Summary

Penske Automotive Group (NYSE:PAG) delivered $7.9 billion in revenue in the first quarter, driven by expansion in international operations and ongoing service and parts growth. Adjusted net income was $201 million after accounting for portfolio optimization-related gains and charges, with operating performance supported by higher sequential gross profit per retail unit and strong Penske Transportation Solutions equity income growth. The company executed strategic acquisitions—two Lexus dealerships in Central Florida—and continued its disciplined capital allocation via steady dividend increases, robust share repurchases, and a maintained sub-2.0 times leverage ratio. M&A activities, portfolio reshuffling, and expansion into Chinese brands in Europe and Australia demonstrate a clear focus on operational agility and revenue diversification.

• Chair and CEO Roger S. Penske said, "Our diversification remains the key strength of our business model," underscoring a multi-segment approach to earnings stability.
• Premier Truck Group's Class 8 orders increased 91% and the industry backlog grew 33% to 175,000 units, positioning the segment for a volume rebound in the second half of the year.
• Penske Transportation Solutions' lease signings increased, with rental utilization up 5 percentage points to 76%, and cost savings in maintenance and depreciation contributed to 24% higher equity income.
• Chinese-branded vehicles are generating higher per-unit gross profit than used vehicles in select U.K. and German locations, with management taking a "walk before we run" approach to further expansion.
• Date-specific recall activity, including Toyota's Tundra engine, BMW starter, and Audi piston/software campaigns, is driving repairs and customer pay activity in the fixed operations channel.
• Share repurchases and dividends returned approximately $1.6 billion to shareholders since 2023, with $221 million remaining under the repurchase program and a 3.4% current dividend yield.

Industry glossary

• Sytner Select: A U.K.-based big-box used-car retail format operated by Penske Automotive Group, used for both traditional used vehicles and introduction of new Chinese automotive brands.
• Class 8 trucks: The heaviest trucks in the North American market, typically used for long-haul freight and over-the-road applications, representing significant commercial truck segment volume.
• Penske Transportation Solutions (PTS): A partially owned affiliate providing portfolio businesses in full-service leasing, rental, logistics, and fleet management.
• BEV: Battery electric vehicle, representing fully electric vehicles as opposed to hybrids or internal combustion engine (ICE) vehicles.
• OEM: Original equipment manufacturer; refers to vehicle manufacturers supplying dealers.
• SAAR (seasonally adjusted annual rate): An auto industry metric estimating the total annual sales pace, seasonally adjusted.

Full Conference Call Transcript

Anthony R. Pordon: Thank you, Krista. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group, Inc.’s first quarter 2026 financial results was issued this morning and is posted on our website along with a presentation designed to assist you in understanding the company’s results. As always, I am available by email or phone for any follow-up questions you may have. Joining me for today’s call is Roger S. Penske, our Chair and CEO; Shelley Hulgrave, our EVP and Chief Financial Officer; Richard P. Shearing from North American operations; Randall Seymore of international operations; and Tony Piccione, our Vice President and Corporate Controller.

We may make forward-looking statements on today’s call about our earnings potential, outlook, and other future events, and we also may discuss certain non-GAAP financial measures such as EBITDA and adjusted EBITDA. We have prominently presented and reconciled any non-GAAP measures to the most directly comparable GAAP measures in this morning’s press release and investor presentation, both of which are available on our website. Our future results may vary from our expectations because of risks and uncertainties outlined in today’s press release under forward-looking statements. I direct you to our SEC filings, including our Form 10-Ks and previously filed Form 10-Qs, for additional discussion of factors that could cause future results to differ materially from expectations.

At this time, I will turn the call over to Roger S. Penske.

Roger S. Penske: Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. We are pleased to report a solid and productive first quarter. During the first quarter, Penske Automotive Group, Inc. delivered over 123,000 new and used vehicles and nearly 3,600 new and used commercial trucks, generating approximately $7.9 billion in revenue. We earned $324 million in earnings before taxes and $235 million in net income and generated earnings per share of $3.56. The first quarter results include a $60 million gain on the sale of a dealership, partially offset by $13 million in certain disposals and other charges as we continue to optimize our dealership portfolio.

Excluding these items, adjusted earnings before taxes was $276 million, net income was $201 million, and earnings per share was $3.05. This was a difficult comparison to the prior-year period, and challenging market conditions impacted year-over-year performance. We also continued to grow our footprint. In February, we acquired two high-performing and strategic Lexus dealerships in the Orlando metropolitan area of Central Florida, one of the fastest-growing regions in the U.S. These acquisitions complement the two Lexus and two Toyota dealerships we acquired in November 2025. Combined, these six dealerships are expected to generate an estimated $2 billion in annualized revenue. We also repurchased 170,000 shares of common stock for $26 million.

We increased the dividend to $1.40, which yields approximately 3.4%, the highest yield in our peer group. Looking at the details for the quarter, same-store retail automotive new units declined 5% and used increased 1%. Units retailed were impacted by weather-related challenges and a difficult comparison to March 2025 when tariffs caused pull-ahead sales and lower sales in the U.S. associated with the elimination of the BEV tax credit. Gross profit per new retail unit was $4,783, up $94 sequentially. Gross profit per used unit was $2,076, up $306 sequentially. Our service and parts revenue and gross profit was a Q1 record. Same-store revenue increased 4.6% and related gross profit increased 5.7%.

Service and parts gross margin was up 60 basis points. In the retail commercial truck segment, Q1 unit sales declined 9% to 3,583 units, driven by reduced order intake during Q3 and Q4 2025 following the implementation of tariffs and weakness in the freight market. However, we are encouraged by the trends we are seeing across the commercial truck market. In recent months, we have seen an increase in new truck orders and expect the timing of these deliveries to take place in 2026. PTS equity income increased 24%.

Growth in full-service leasing revenue; improved fleet utilization; and lower operating and interest expenses resulting from continued fleet reductions, including maintenance and depreciation, were partially offset by continued challenges in rental and lower gain on sale of trucks. At this time, I will turn the call over to Richard P. Shearing.

Richard P. Shearing: Thank you, Roger, and good afternoon, everyone. In U.S. retail automotive, same-store new and used unit sales were affected by two major winter storms, the Liberation Day tariff announcement and pull-forward of retail sales in March, and lower BEV sales from easing emissions regulations and the elimination of the BEV tax credit in September 2025. During the quarter, 25% of new units sold were at MSRP, compared to 29% in Q1 last year. Same-store service and parts revenue increased 3.2% and gross profit increased 3.4%. Customer pay was up 4%, warranty was up 5%, and collision repair declined 4%. Our U.S. automotive technician count is up 3% when compared to March, and our bay utilization is 84%.

Turning to Premier Truck Group. During Q1, Premier Truck retailed 3,583 new and used trucks, generated $695 million in revenue, and $128 million in gross profit. On a sequential basis compared to Q4 2025, new unit gross increased $111 and used unit gross increased $4,624. New unit sales were down 26% and were in line with the overall North American Class 8 market. The recessionary freight environment and market uncertainty associated with tariffs and the status of emissions regulations impacted new truck orders during the last half of 2025. However, as Roger mentioned, in recent months, we have seen an increase in new truck orders.

In fact, Class 8 orders increased 91% and the industry backlog grew 33% to 175,000 units in the first quarter when compared to March. We expect this increase in order activity to result in higher new unit sales in the second half of this year. Service and parts revenue increased 5% as average daily activity continues to grow and service backlog is beginning to increase. Service and parts gross profit represented 73% of segment gross profit during Q1. Turning to Penske Transportation Solutions. We are encouraged by the stronger financial performance of PTS. During Q1, operating revenue declined 4% to $2.5 billion. Lease revenue increased 2%, rental revenue declined 17%, and logistics revenue declined 3%.

PTS sold 9,319 units in Q1, ending the quarter with a fleet size of 387,500 units compared to 435,000 at December 2024. Gain on sale declined by $26 million in Q1 2026, compared to Q1 2025. As PTS continues to rightsize its fleet, higher fleet utilization and lower operating costs for maintenance, depreciation, and interest expense contributed to an increase in earnings. Overall, our equity income from PTS increased 24% to $41 million. I would now like to turn the call over to Randall Seymore to discuss our international operations.

Randall Seymore: Thanks, Rich. Good afternoon, everyone. During Q1, international revenue was $3.3 billion, up 6%. International new units were up 2%, and used increased 3%. Same-store service and parts revenue increased 7% as our strategies to increase customer pay drove a 10% increase, which more than offset the 3% decline in warranty. In the U.K. market, Q1 automotive registrations increased 6% to 615,000, driven by private and retail demand and an increase in Chinese OEM sales. While we were encouraged by Q1, the U.K. automotive environment remains challenging as inflation, higher taxes, consumer affordability, and the government mandate towards electric impact the overall market.

During Q1, our U.K. same-store new units delivered were flat from lower sales of several German luxury brands and the elimination of the Motability programs for these luxury brands. Same-store used units increased 3% and gross profit per unit increased $500 sequentially when compared to Q4 2025. Turning to Australia, our EBT increased 15% compared to Q1 last year. In automotive, our three Porsche dealerships in Melbourne continue to gain market traction through implementing our Porsche One ecosystem process. This process has driven higher customer satisfaction, with all three dealerships in the top five, including the top position nationally.

Although we had a decline in new unit sales associated with the transition of the Macan to an all-electric vehicle, we had a strong mix of higher-end vehicles and our focus on pre-owned and aftersales continues to drive the business. In the Australian commercial vehicle and power system business, we are diversified with revenue and gross profits split approximately two-thirds off-highway and one-third on-highway. The off-highway business continues to grow. The current order book has exceeded our full-year business plan with strength seen in Energy Solutions, mining, and defense sectors. We have over A$600 million in secured orders so far for 2026. The engines and support we provide will be critical as this segment evolves.

We continue to see the potential for our energy solutions business to generate at least $1 billion in revenue by 2030. Over the last several years, our focus has been to increase units in operation to grow the recurring service, parts, and remanufacturing aspects of our business, and this focus is starting to pay off. One of the major mining customers operates a 125-megawatt power station with 20 Bergen engines that we installed four years ago. As part of the major maintenance interval, we have begun to remanufacture 300 cylinder heads, which will generate approximately 15,000 hours of work for our business.

I would now like to turn the call over to Shelley Hulgrave to review our cash flow, balance sheet, and capital allocation.

Shelley Hulgrave: Thank you, Randall. Good afternoon, everyone. We remain committed to a strong balance sheet and a flexible and disciplined approach to capital allocation while driving our diversification strategy, implementing efficiencies, and striving to lower costs. SG&A expenses increased by 1.5%, which is lower than the rate of inflation, while gross profit declined 1.7%. SG&A as a percentage of gross profit for Q1 2026 was 74.3%. Adjusted SG&A to gross profit was 73.3%.

Q1 SG&A to gross was impacted by employee benefit costs up $4 million, payroll taxes and other U.K. social programs up $3.5 million, rent and real estate taxes up $7 million, and lower automotive units and the impact from lower sales of new and used commercial vehicles at Premier Truck Group. During Q1, we generated $215 million in cash flow from operations and EBITDA of $397 million. During Q1 2026, we invested $63 million in capital expenditures, down from $85 million in Q1 2025. We completed acquisitions of two Lexus dealerships, representing $450 million in estimated annualized revenue. We increased the cash dividend to $1.40 per share, representing the twenty-first consecutive quarterly increase.

On a forward basis, our current dividend yield is approximately 3.4% with a payout ratio of 39% over the last twelve months. We repurchased 170,000 shares of common stock for $26 million. As of 03/31/2026, $221 million remained available for repurchases under our securities repurchase program. Since the beginning of 2023, we have returned approximately $1.6 billion to shareholders through dividends and share repurchases. At March 31, non-vehicle long-term debt was $2.6 billion and leverage was only 1.8 times despite completing several large acquisitions over the last six months. Floor plan was $4.1 billion and we have $425 million in vehicle equity. For the quarter, total interest expense increased $2 million.

Floor plan interest decreased $4 million due to our cash management and lower interest rates, while other interest expense increased $6 million, primarily from higher borrowings for acquisitions. We estimate a 25 basis point change in interest rate would impact interest expense by approximately $15 million. Our effective tax rate was 27.4% in Q1 2026. The prior-year results have been recast for the acquisition of Penske Motor Group using common control as disclosed last quarter. As a reminder, PMG was a partnership prior to our acquisition and was not subject to income tax. Q1 2025 does not reflect federal or state income taxes had PMG been included in our taxable group.

Therefore, period-over-period net income and earnings per share may not be directly comparable due to the change in tax status of PMG. The impact to the effective tax rate would have been approximately 100 basis points and the impact to earnings per share would have been $0.05. Total inventory was $4.9 billion, up $77 million from December 2025. New vehicle inventory is at a 44-day supply, including 46 days for premium and 29 days for volume. Used vehicle inventory is at a 39-day supply, with the U.S. at 33 days and the U.K. at 42 days. At March 31, we had $84 million in cash and liquidity of $1.2 billion.

At this time, I will turn the call back to Roger for some final remarks.

Roger S. Penske: Thank you, Shelley. As mentioned, we added two Lexus dealerships to Penske Automotive Group, Inc. during the first quarter, and today, I would like to welcome our new teams at Lexus Orlando and Lexus Winter Park to our organization. As I said earlier, we had a solid first quarter and I continue to remain optimistic about our business. New and used retail automotive gross has remained strong, and service and parts continue to grow. Our diversification remains the key strength of our business model. The recovery in the commercial truck market is underway. We expect increased new truck orders to benefit the second half of the year, and our retail truck dealerships and PTS investment should benefit.

Again, thanks for joining our call. We will now open the call for questions.

Operator: Thank you. Your first question comes from Michael Patrick Ward with Citigroup. Please go ahead.

Michael Patrick Ward: Hey, everybody. Thank you very much, and good afternoon. I hope you all are doing well. Weather had a significant impact on the industry in January and February in the U.S. Can you quantify at all how much you were affected, and were you able to get any of that back?

Richard P. Shearing: Good question. As I mentioned in my prepared remarks, two significant storms—one in January, one in February—impacted the quarter. The first storm in January was almost 2,400 miles in its length, so it impacted our businesses from Texas all the way to the Northeast. We had either delayed openings or multiple-day closures as we dealt with the cleanup. February was not as bad but did impact the Northeast significantly. The good news is competitors around us in those markets also suffered the same challenges, so we do not think consumers were running to other dealerships to buy cars while we were struggling. From a fixed gross standpoint, there was lost business because that is time you cannot get back.

We had the added expense of snow removal, and we attribute the fixed gross loss to about $4 million to $5 million, and in total overall about a $6 million impact to our earnings in Q1 related to the weather.

Michael Patrick Ward: Thank you. You called out costs on the SG&A side of about $15 million. It sounds like some of those will be recurring—the rent and the health in the U.K. Are those one-time in nature, or nonrecurring? What were you alluding to with that?

Shelley Hulgrave: A little bit of both. Certainly rent increases we see year-over-year. Health benefit plans—we hope those costs go down, but that does not seem to be the trend. I wanted to highlight that the U.K. social programs is the last quarter before we anniversary those, so it is a bit incomparable compared to 2025, but we will see that anniversary in Q2.

Michael Patrick Ward: And that is about 30 or 40 bps, right?

Shelley Hulgrave: Something like that. We estimate without those that our SG&A to gross would be in that 71% to 72% range that we had talked about, so we are still comfortable in that low-seventies range.

Michael Patrick Ward: Thank you. Lastly, it looks like you have been doing some portfolio rebalancing. Usually you do not see much movement in the retail automotive revenue mix, but you see a couple of good changes year-over-year. Is that a trend we can look to more, and are those going to be your focus brands—continuing to focus on the luxury and the volume foreign? That is the strategy, correct?

Roger S. Penske: We sat with our board about eighteen months ago to determine our strategy on brands and locations, domestically and internationally. We looked at our low performers, the manufacturers’ CapEx expectations, and what we could grow in those businesses. We determined there were a number of locations we needed to sell in order to get the returns we wanted. In connection with our commitment to go forward with Penske Motor Group, we committed to sell two Lexus stores—one in Warwick and one in Madison, Wisconsin—which we completed. That gave us the opportunity to buy the Orlando stores and the PMG stores.

Along with that, we took out a number of other smaller locations—some larger, some in the U.K.—and that generated about $325 million to $350 million of free cash flow from these stores we sold, which we used to acquire these other key stores. We will continue to prune the portfolio. We are still in the acquisition business. In the U.K., we reduced our number of Sytner Select stores from 14 to 6, which is paying off. We are taking those locations and adding Chinese brands in the same showroom. Overall, the strategy has worked, and we have kept our leverage, as Shelley said, around 1.8 times.

The cost of doing business is high, and some smaller locations with all the controls you need and the high cost of the best people do not give us the returns we want. We are looking for locations we can add on in key markets.

Anthony R. Pordon: Mike, page nine of our earnings presentation is a key chart in the deck that lays out our total revenue mix. You can see there, in particular, premium is 72%, volume non-U.S. is 22%, and Toyota/Lexus has jumped up to 18% of our overall automotive business. This reflects the acquisitions and the OEM presence that we have.

Operator: Your next question comes from the line of Rajat Gupta with JPMorgan. Please go ahead.

Rajat Gupta: Great. Thanks for taking the question. Just wanted to follow up on PTS—pretty nice earnings growth in the quarter despite the lower gain on sale. A lot of those improvements are coming from just lower maintenance, debt, fleet costs, etc. How should we think about the trajectory of PTS earnings for the remainder of the year? Any guardrails for the full year?

Roger S. Penske: We have come from roughly 430,000 units in the fleet to 387,000 at the end of the quarter, which reduced interest cost and depreciation significantly. Our fleet utilization on the rental side moved from about 71% up to 76%. Operating performance has been excellent during the quarter and in Q4 as well. Gain on sale was down $26 million in the quarter, but we picked that back up through utilization, lease revenue, and our logistics businesses, which provided an overall profit pickup from about $120 million to $142 million. Lower operating expenses—maintenance, depreciation, interest—were key.

Think about interest, depreciation, and gain on sale: gain on sale is down but still higher than pre-peak, and rental utilization is up about 500 basis points.

Rajat Gupta: Got it. So these trends seem sustainable for the remainder of the year from a cost and earnings perspective?

Roger S. Penske: We probably have another 3,000 to 4,000 units that we will take out this year from the fleet. With rental revenue coming back, we can take some off-lease equipment and replace that. Older trucks are out now, which were providing much higher maintenance, so maintenance and tire expense are much better. Customer acceptance is key—we are starting to see people signing up for long-term leases again. There was a pause the last 90 to 120 days with emissions and costs, and in Q1 we saw lease signings go up, which bodes well because these leases are three to five years with economic escalators.

Rajat Gupta: Thanks. On parts and service internationally, strong numbers overall, but excluding FX it was probably flat to slightly up. Is that correct, and what initiatives are in place to accelerate that growth?

Randall Seymore: That is correct excluding FX. In the U.K., we were slightly up. Italy was up 11%, Germany up 20%. It is driven by customer pay focus because warranty is down. Internationally, we do not get the markup on parts for warranty like in the U.S.—only about a 10% margin on warranty parts—whereas customer pay is the same as U.S., so the mix shift to customer pay is driving higher-margin growth.

Rajat Gupta: What is the mix of your business U.K. versus non-U.K. in rough terms?

Randall Seymore: I will get that back to you offline after the call.

Operator: Your next question comes from the line of Jeffrey Francis Lick with Stephens. Please go ahead.

Jeffrey Francis Lick: Good afternoon. Thanks for taking my question. As we get into April through the rest of the year, last year luxury started to lag the broader auto sector, with the exception of August and September with EVs. How are you seeing things now as the year plays out on new luxury, and anything to think about as we lap the EV compares?

Richard P. Shearing: On EVs, our EV sales were down 61% this year compared to last year. On the West Coast, particularly California, there is still demand for BEVs, but we have not fully replaced that with hybrids or ICE, so it is a tough compare. We thought higher fuel prices from the Iran conflict might drive near-term BEV demand, but that has not materialized. The escalation in fuel prices has not overcome consumer concerns around range and charging infrastructure. I do not see a material change for BEVs for the balance of the year. It has stabilized post the tax credit removal at about 4% to 5% of overall retail sales.

On luxury, we have tough comps—March SAAR was 17.6 million, April at 17.0 million. In premium luxury, sales are a bit down. Audi in Q1 was down about 30% overall as they await new model launches. BMW down about 15%. Porsche is challenged with Macan going away ahead of the relaunch, down about 18%. Mercedes is similar to BMW, down about 15%. The good news is OEMs have adjusted to tariff impacts. Incentives and programs, which were held back in the latter half of last year, are back—good if not great—and product desirability remains strong. Dealer meetings show a bevy of new products launching this year. With our 72% premium mix, we are well positioned.

On service and parts, fixed gross overall was up about 3.5% despite storm impacts. Customer pay ROs were a highlight—continued focus there. Recalls continue: Toyota expanded the Tundra engine recall to 2023 and 2024 model years, BMW has a starter recall, and Audi has piston replacements on the 3.0-liter (about a 30-hour job) plus a proactive software campaign on Q5. OEMs would prefer not to have these recalls, but they continue to occur.

Operator: Your next question comes from the line of John Babcock with Barclays. Please go ahead.

John Babcock: Thanks. On the truck market, you are expecting an increase in truck orders, particularly in the second half. How sustainable is this—do you see long-term sustainable demand or is this temporarily driven by short-term factors like regulations?

Richard P. Shearing: There is some short-term influence, similar to the lack of orders in Q3–Q4 last year when EPA 27 was uncertain. Once there was finality on EPA 27 guidelines, customers could understand the rules and that drove orders early this year—Class 8 orders up 91% and backlog up 33% to 175,000 units. We also saw a near-term bump with tariff announcements in February, with a grace period for orders placed by March to avoid tariff price increases of $1,000 to $1,500 depending on heavy-duty or medium-duty. Structurally, DOT and FMCSA have been cracking down on illegal carriers and non-domiciled CDL holders, tightening capacity. Spot rates are up 30% to 40% year-over-year, driving higher utilization of legal operators.

We see that in our parts and service revenue up just over 4%—first growth in six quarters in fixed gross. Higher freight rates are also driving near-term used truck demand—volumes trending upward and used gross profit up almost $4,000. Publics like J.B. Hunt and Covenant have noted these changes feel structural, not temporary.

John Babcock: Thanks. On M&A, you have increased exposure to Toyota and Lexus recently. Going forward, should we think about expanding brands or certain geographies, and how are you balancing leverage?

Roger S. Penske: Our leverage gives us flexibility. We are about 70%-plus premium luxury and 21%–22% volume foreign, and we are focusing on the mix and opportunities in those areas. Our goals are to maintain the dividend, buybacks, and CapEx. By eliminating some stores, we aim to reduce CapEx by about $100 million this year. Internationally, we have pruned as well. We are investing in Australia in defense, power systems, and power generation. Diversification is a strength. Premier Truck Group’s Freightliner business is a market share leader—we would look for other locations in the U.S. and Canada to represent them. We will be selective—right brand, right location, profitable. We added about $2 billion of revenue; now we integrate those acquisitions.

Toyota and Lexus have the lowest day supply in the industry—under 20 days, with some Lexus stores under 10—keeping product tight, which is how they plan to operate. Land Rover and Porsche are constrained due to supply and tariffs, not demand. We will be cautious. If smaller operators contiguous to our markets are available, we will pursue them when it makes sense.

Operator: Your next question comes from the line of Analyst with Stonex. Please go ahead.

Analyst: Thanks for taking my question. Could you comment on what you saw in Q1 regarding Chinese models taking share in international markets, implications to premium luxury, and whether you plan to build exposure with these models or take it slow?

Roger S. Penske: Let us have Randall address this—he just returned from the auto show in China and can speak to what we are seeing in the U.K. and Europe.

Randall Seymore: The Chinese brands are gaining share in Europe. In the markets we are in—the U.K., Italy, and Germany—they have more than doubled. In Australia, last year Chinese brands were 15% and year-to-date through Q1 they are up to 23%. We have put our toe in the water in the U.K. and Germany starting effectively at the beginning of the year—11 locations between the U.K. and Germany across four brands. Our strategy is to place these brands in existing facilities. In the U.K., we are using Sytner Select big-box used car retail sites to add the brand with minimal CI spend, so we do not add fixed expense and can sweat the asset more. Early results have been positive.

We will walk before we run. These big-box sites get about 400 guests per week, and Chinese OEMs are eager to partner. You cannot lump all Chinese brands together—each has pros and cons—so we will expand where it makes sense with eyes wide open.

Analyst: Thanks. As a follow-up, what are you seeing on unit profitability with these vehicles?

Randall Seymore: It differs by market. In the U.K., Geely and Chery have been good to deal with. Key concerns are over-inventory and over-dealering, which can lead to a race to the bottom. A greenfield standalone store has no fixed operations initially—fixed absorption is zero—so it is harder to get a return. In Germany, we have BYD and MG—too early to tell.

Roger S. Penske: In the big-box locations, we are probably getting a couple thousand pounds more gross on the Chinese brands than on used vehicles we are selling in the same stores right now. It could be Christmas—we will see how it evolves—but the product is good.

Randall Seymore: We are not seeing consumer pushback. The mix has been about 50% retail, 50% fleet. They will place some fleet to seed the market and drive awareness. Their approach has been sensible overall; as a dealer, we just need to ensure they do not saturate the market.

Analyst: Lastly, any implications for aftersales with these brands—is it the same process getting them in the service lanes and similar RO?

Randall Seymore: Good question. The key is preparedness—having the right safety stock of parts so when customers come in we can handle them efficiently. That was a big message to these OEMs; they seemed to understand. We have not had challenges yet, but volumes are minimal so far, so I cannot quote dollar per RO. Many of these cars have seven-year warranties, so customers may be stickier versus three- or four-year warranties.

Roger S. Penske: The used-car buyer behavior and captive finance support are unknowns. The best captives drive the best outcomes, and today many are using banks and buying down rates to be competitive. We do not yet have large units-in-operation, which is why Randall is placing these brands where we already have revenue and full fixed operations—the same lifts and technicians—so we utilize assets better. We are trying different approaches in Germany versus the U.K.

Randall Seymore: In Australia, we do not have Chinese brands in our portfolio currently, but market share for Chinese brands is up to 23%. Australia is more pinched by fuel—only two refineries—so it depends on imports. Fuel prices went up more than in most countries, and they have seen significant increases in BEV adoption.

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