Roger Penske: Yeah. Randall, talk a little bit about BEV sales in the U.K. and the rest of Europe.
Randall Seymore: Yeah. So look, like I said, a little bit challenging. What I think an interesting statistic is it, specific in the U.K., the market’s up, like we said, but retail is only up 2% and fleet’s really driving this and the BEVs are really coming through those fleet purchases as you get the tax incentive through the scheme they have in the U.K. And then you look at countries like Italy and Spain, where there’s very, very little government incentives and you have got BEV percentages between 3.5% and 6% penetration. So it’s really followed the incentives. And the challenge that we have seen from an infrastructure standpoint and range anxiety, all the usual items.
Tony Facione: Randall, it’s important to note, too, that the U.K. just within the last couple of months decided to push back the mandatory adoption of BEVs from 2030 to 2035.
Randall Seymore: Yeah.
Tony Facione: So I think that comes into play and we should watch that carefully, too. So ICE will continue to be a more prominent player in that market we think for a longer period of time.
Randall Seymore: Most similarly, Tony, too California pushed back the ban of ICE vehicles as well.
Tony Facione: They did. That’s right.
Roger Penske: So I think today we have got a lot of people on premium side have bought their EV. There’s still a discussion about range, correct?
Tony Facione: Yeah.
Roger Penske: Obviously, that is critical. And then infrastructure, about half of it is working.
Tony Facione: Yeah.
Roger Penske: And I think that you are reading it in the papers today. I mean we are pushing back, I would have to say that every day we talk to our field, we are talking about BEV inventory and talking about how much more do you want. It’s what do you have and we are very careful on used pricing also. What’s your inventory in the U.S.?
Tony Facione: Inventory of used BEVs is 134 units.
Roger Penske: Yeah. What would it be — you don’t know what is in the U.K. But again we are really watching it and I think the interesting we can actually take a BEV in on trade and sell it and get more for a used one gross profit than we can on a new one. So it’s — there’s so many moving parts we can spend an hour here and talk about it.
Daniel Imbro: No. That was all extremely helpful. I will follow up with one on the Commercial Truck side. Obviously, overall solid profit quarter, but we did see service and parts growth maybe moderate a bit. I am trying to understand that in the context of what we said about PTS, fewer delivery for PTS means that fleet spending $40 million more year-over-year on maintenance costs. So I would think if fleets are spending more on maintenance, that would drive maybe more service and parts growth. Can you maybe talk about why has service and parts growth moderated and kind of what the buckets were within that piece on the Commercial Truck side?
Tony Facione: Yeah. So if you look at fixed operations in the Premier Truck Group business, year-to-date, we are up 8% for the quarter. We were up 4% versus prior year. So definitely a slowdown slightly compared to prior year. If you look into that then a little bit deeper in the constituents of that of service and parts, the majority of that is going to be related to the retail and wholesale parts side of the business. So you have got — on the wholesale side, you have got a big business here where we are selling to independent repair centers. Then on the retail side, a lot of planned business [ph] carriers transition or transport goods down the federal highway system. So you have seen as the freight rates have declined year-over-year that the activity and utilization of some of the assets has declined as well and so that’s where you are seeing a slight softening in the fixed operations side of the business.
Roger Penske: I think we had a benefit out of price increases.
Tony Facione: Yeah. We have some parts depreciation in calendar year 2022 as well that would not be in those comparables this year.
Shelley Hulgrave: Daniel, we are still covering 132% fixed absorption. So not a bad story by any means.
Daniel Imbro: Yeah. That’s really helpful. I appreciate all the color and best luck going forward guys.
Roger Penske: Thanks, Dan.
Rich Shearing: Thanks, Dan.
Operator: Next we go to Rajat Gupta. Please go ahead.
Roger Penske: Rajat, hi.
Rajat Gupta: Great. Hi, Roger. Thanks for taking the question everyone. Could you unpack the SG&A to gross in the quarter a little bit? How much of the sequential move was driven by just the GPU weakness versus some of the delivery delays in U.K. for BMW, Volkswagen? We heard from one of your peers that, that was an issue and just like any other items that you might want to call out that might have influenced the SG&A to gross? And I have a follow-up. Thanks.
Shelley Hulgrave: Hey, Rajat. I can take that. As I mentioned, SG&A to gross was 69.9%, those 300 basis points, we have really whittled it down to three main areas. So as we mentioned, $5.5 million or 50 basis points related to the hail damage within the quarter. So we have got that. The other — there’s another 100 basis points that relate to service loaners in vehicle maintenance. So up $11 million. But as we have talked about, service loaners represents an opportunity for us. It’s a way to cater to our service customers and improve our service gross profit as we saw as a result but then it’s also an excellent source of used cars. And then all of the peers have talked about, we are certainly struggling sourcing used cars.
So the fact that we have got almost 7,400 of service loaners available really will be future gross profit for us, but it also helps with servicing our customers right now. So as they have affordability concerns, if somebody comes in, wanting to buy a new X5 and can’t quite stomach the higher payment, we can turn to our service loaner fleet and that not only helps the customer, he’s walking away with an almost brand-new X5. But his team is more in line with what he’s used to. So sometimes those costs aren’t always a bad thing and then the other 160 basis points or so is increased costs related to our personnel. But as we have talked time and again we are still very comfortable that everything will eventually normalizes out in that 70%-ish range.
