Why is the largest American car dealer not interested in Chinese cars?

DETROIT — The largest U.S. auto dealer is not interested in selling cars from China-based brands domestically for now, its CEO said Wednesday.

But it doesn’t have to be because of politics, logistics or potential consumer backlash, according to Lithia Motors CEO Brian DeBoer. His company already has at least 10 stores selling cars from three Chinese companies in the UK.

DeBoer, who has grown Lithia significantly in recent years, said the potential cost, return on investment and necessary infrastructure, largely due to franchise bases in the U.S., are the biggest hurdles right now.

“We are very excited that we have this opportunity in the UK, but there is a big fundamental difference,” De Boer told investors on Wednesday, citing “franchise dueling” practices in the UK that allow Lithia to offer brands from different companies in the same showroom if they are considered competitors.

De Boer said a dealer could be allowed to place cars from a company like Chinese automaker Chery, which is growing in Europe, in an existing showroom in the UK, and it would cost less than $100,000.

This is not the case for the United States, where franchise dealer laws are strict, vary by state, and companies can have more influence, if not have rules against, such decisions.

His comments come as Chinese car brands increasingly export and expand beyond their domestic markets.

The global market share of Chinese brands has jumped nearly 70% in five years, and many experts see a threat to US automakers, including the expected entry of Chinese brands into America. There were cars produced in China for sale in the United States from brands like Buick and Volvo, but none of them were from Chinese brands like BYD, Nio, or others.

In the United States, Lithia will need to set up new retail locations and service operations to support sales of Chinese brands, which means having to make entirely new investments. He noted that approximately 50% to 60% of the company’s profits come from service and spare parts.

“I think we probably won’t be early adopters when it comes to the United States or maybe even Canada, primarily because we’re not in a dual-privilege mode,” he said.

The latest expansion announced by China is to Canada, a relatively small auto market that has removed 100% tariffs on vehicles imported from China amid a trade dispute with the Trump administration.

But DeBoer said the Oregon-based company hasn’t completely closed the door, as Chinese brands continue to grow globally.

“We have constructive relationships with a number of Chinese brands,” he said. “We will keep our minds open and look at the opportunities that will present us in the future.”

DeBoer’s comments came on the company’s call to discuss fourth-quarter and year-end earnings, which included 4% year-over-year increases in revenue and 3.1% in gross profit.