The Zacks Auto Retail and Wholesale industry is navigating a mixed operating environment, with near-term demand facing pressure from slowing vehicle sales, high borrowing costs and affordability constraints. The EV market is also adjusting to the loss of federal tax incentives, while policy and trade uncertainties continue to cloud pricing visibility. However, industry fundamentals are improving, supported by consolidation activity, disciplined cost structures and rising digital adoption. Against this backdrop, select players are better positioned to outperform. AutoNation, Inc. (AN Quick QuoteAN - Free Report) and Asbury Automotive Group (ABG Quick QuoteABG - Free Report) stand out by accelerating strategic acquisitions and scaling up digitization initiatives to drive growth and shareholder value.

Industry Overview

The auto retail and wholesale industry plays a key role in how cars, trucks and auto parts reach consumers. Companies in this space operate through dealership networks and retail chains, selling both new and used vehicles, offering repair and maintenance services, and helping customers with financing. Since this is a consumer-driven industry, its performance often depends on how strong the economy is. When people have more disposable income, they're more likely to spend on vehicles. But during tougher times, like economic slowdowns, big purchases are often put on hold. The COVID-19 pandemic changed the way the industry works, pushing dealers to focus more on online tools and e-commerce. That digital shift is expected to continue, shaping how vehicles are bought and sold in the future.

Factors Shaping the Industry Dynamics

Slowing Sales and Affordability Pressures: U.S. vehicle sales are expected to moderate in 2026 as economic growth slows and affordability challenges persist. Cox Automotive projects total new vehicle sales of about 15.8 million units, reflecting a 2.4% year-over-year decline, while new retail sales are likely to fall 1.5% to 13.1 million units. High interest rates, fewer manufacturer incentives and tighter household budgets are weighing on demand. At the same time, vehicle prices remain elevated, with the average new car transaction price near $50,000, and financing costs consuming a larger share of household income, limiting buyer activity across retail and wholesale channels.

EV Market Reset and Policy Headwinds: The auto industry is facing near-term uncertainty as the EV market adjusts to the loss of federal tax incentives. With 2026 marking the first full year without EV tax credits, automakers such as Ford, General Motors and Stellantis are scaling back EV investments and shifting focus toward gas and hybrid models. This is likely to slow EV sales and production growth in the near term. At the same time, evolving trade policies, potential tariffs, and changes to the USMCA agreement are adding cost uncertainty, particularly for EVs, leading to volatile pricing dynamics across retail and wholesale markets.

Strategic Buyouts Expanding Market Reach: Auto retailers are actively pursuing acquisitions to expand their geographic footprint and strengthen competitive positioning. By entering new markets, dealers can diversify brand portfolios, broaden their customer base and enhance after-sales service offerings. These acquisitions also support economies of scale, improve purchasing power and drive operational efficiencies, helping retailers better navigate a challenging demand environment.

Digitization Enhancing Customer Experience:Dealers are accelerating investments in digital platforms to deliver a more seamless and convenient buying experience. Tools such as virtual showrooms, online pricing and digital trade-in options are improving transparency and customer engagement. This digital shift is expanding reach, boosting customer satisfaction, and supporting margins, allowing auto retailers to remain competitive as consumer buying behavior evolves.

Investor-Friendly Capital Allocation: Many auto retailers continue to prioritize shareholder returns through consistent share buybacks and dividend increases. Strong cash flow generation—supported by disciplined acquisitions, store expansion, and cost-control initiatives—has enabled companies to maintain attractive capital return strategies. These investor-friendly moves enhance earnings visibility and reinforce confidence in the industry’s longer-term outlook.

Zacks Industry Rank Is Encouraging

The Zacks Auto Retail & Wholesale industry is part of the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #89, which places it in the top 36% of nearly 245 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.

We will present a couple of stocks that you might consider adding to your watchlist. But before that, let’s discuss the industry’s recent stock market performance and valuation picture.

Industry Lags Sector and S&P 500

The Zacks Auto Retail & Whole Sales industry has underperformed the Zacks S&P 500 composite as well as the Auto, Tires and Truck sector over the past year. The industry has declined more than 1% over this period compared with the S&P 500 and sector’s growth of 18% and 12%, respectively.  

One-Year Price Performance

Industry's Current Valuation

Since automotive companies are debt-laden, it makes sense to value them based on the enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio.

On the basis of the trailing 12-month EV/EBITDA, the industry is currently trading at 8.36X compared with the S&P 500’s 18.68X and the sector’s trailing 12-month EV/EBITDA of 26.92X.

Over the past five years, the industry has traded as high as 10.79X, as low as 4.78X and at a median of 7.21X, as the chart below shows.

EV/EBITDA Ratio (Past 5 Years)

2 Stocks to Buy

AutoNation: This is one of the largest automotive retailers in the United States. The company benefits from a wide geographic presence and a steadily expanding dealer network, which helps it reach more customers across key markets. AutoNation has been actively growing through acquisitions. In December, it expanded its Maryland footprint by adding a Toyota store in Baltimore, which is expected to generate about $123 million in annual revenues. Earlier, it added Audi and Mercedes-Benz stores in Chicago, contributing an estimated $325 million annually. In March, AutoNation acquired Groove Ford and Groove Mazda, adding another $219 million in annual revenues.

Beyond physical expansion, AutoNation is strengthening its digital capabilities through its AutoNation Express platform, making online vehicle buying and selling easier for customers. Its Finance division is also improving, supported by higher in-store penetration and rising profitability. Importantly, AutoNation continues to prioritize shareholder returns, with the board approving an additional $1 billion in share repurchases in October.

AutoNation currently carries a Zacks Rank #2 (Buy) and has a Value Score of A. The Zacks Consensus Estimate for 2026 sales and EPS implies year-over-year growth of 2.4% and 4.8%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price & Consensus: AN

Asbury: It is a well-diversified auto retailer with multiple income streams that help reduce risk and support steady top-line growth. The company benefits from a balanced mix of new and used vehicle sales, parts, services and finance offerings. Asbury is also pushing ahead with digitization through its Clicklane platform, an end-to-end e-commerce solution that allows customers to complete most of the car-buying process online, improving convenience and efficiency.

Strategic acquisitions remain a major growth driver. The purchase of Larry H. Miller Dealerships strengthened Asbury’s presence in fast-growing Western markets. The Total Care Auto acquisition expanded the business into the F&I segment, adding higher-margin revenues. Deals for Jim Koons and The Herb Chambers Companies further scaled the platform, together adding roughly $6 billion in annualized revenues. In addition, Asbury’s rollout of Tekion’s Automotive Retail Cloud is showing early benefits, with pilot stores reporting better productivity, simpler operations, and faster employee training.

Asbury currently carries a Zacks Rank #2 and has a Value Score of A. The Zacks Consensus Estimate for 2026 sales implies year-over-year growth of 6%.

Price & Consensus: ABG