Lithia Motors

1. Concentration Risk: Lithia Motors’ strategy of focused expansion puts the company at risk of a potential decline in its target segments. This concentrates the company’s risk in one area, and if the targeted areas do not perform as expected, revenues and profits may be adversely affected.

2. Dependence on Manufacturers: Lithia Motors’ success depends largely on its support and cooperation from car manufacturers and distributors. If the company fails to cultivate strong relationships with key partners, it could have difficulty obtaining competitive pricing and terms from new-car dealers.

3. Competition: Lithia Motors faces competition from independent dealers, new-car dealers, and other automobile retail chains. If its competitors are better able to meet customer needs or have stronger relationships with manufacturers, Lithia could lose sales to them.

4. Economic Risk: The automobile industry is susceptible to wide price fluctuations due to changes in manufacturing costs, fuel prices, and demand. A decrease in demand for vehicles may lead to decreased revenues. In addition, higher fuel prices may cause customers to opt for smaller or more fuel-efficient vehicles, which may reduce sales of larger vehicles, which comprise a significant portion of Lithia’s sales.