Introduction
Table of Contents
LKQ Corporation, formerly known as LKQ Corporation, is an automotive parts supply chain management company that offers original equipment manufacturer (OEM) and aftermarket parts. The company was founded in 1967 as a salvage yard with one location near Los Angeles International Airport. Since then, the company has grown to over 1,000 locations across North America and employs over 7,000 people. LKQ operates under four business segments: retail markets; wholesale markets; branded products; and services & logistics.
In this article we’ll take a look at LKQ’s business model by analyzing its revenue streams and profit margins (click here for more on this). We’ll also discuss some of the key trends affecting it going forward such as increasing demand for used parts due to shrinking vehicle lifespans and rising costs for new vehicles relative to inflation rates.”
LKQ’s business model is primarily based on selling used parts.
- LKQ is a publicly traded company.
- LKQ is a Fortune 500 company.
- LKQ is based in the US, but it’s a global business with operations throughout North America, Europe and Asia.
- It’s an American family-owned company founded by 3 brothers in 1950 who started out selling used car parts from their garage.
LKQ has a market cap of over $7 billion.
LKQ has a market cap of over $7 billion. In other words, it’s worth more than the world’s largest publicly traded company, Apple. LKQ is also the largest auto parts recycler in the US and is a top 100 company on the S&P 500.
LKQ’s used parts sales are growing faster than new parts sales.
As you can see, our used parts business is growing faster than new parts. And this trend is not confined to the US: international markets are seeing a similar increase in demand for used parts.
LKQ’s operating margin is about 15%.
The operating margin is the amount of money that a company has left over after all its expenses are accounted for. It’s calculated by dividing a company’s operating income by its total sales. Operating income is the difference between what it costs to produce and sell your product, and what you actually sell it for. For example, if you’re selling an engine for $100 and it cost you $50 to make it, then your operating margin would be 50%. A higher operating margin means that more money is going into profit after expenses are taken out.
If we take a look at LKQ’s last annual report (you can find this at secinfo.com), here’s what we see: LKQ had total revenues of $5 billion in 2016 and they spent just over $3 billion on purchasing used parts (this includes things like shipping). Their gross profit was therefore about $2 billion–which sounds great! But remember: they have overhead costs too—like paying employees and rent on buildings—that also need to be paid out before any profits can be distributed among shareholders. So when we factor those other expenses into our calculation, LKQ only made about $300 million in profit during 2016–or about 5% of their total sales revenue! That isn’t very good…but compared with other companies within the same industry (like American Axle & Manufacturing Corp.), LKQ actually does pretty well by comparison; those guys only manage 3% margins themselves!
Over 50% of US vehicles are more than 10 years old.
You might think that the US is a big market for used parts, but actually it’s not. The US has a very large number of vehicles on the road, but not all of them are in good condition. And this means that over 50% of US vehicles are more than 10 years old! That’s why we can afford to sell secondhand parts so cheaply: there just simply isn’t enough demand for new ones (unless you have a special car).
The average age of a vehicle on the road in the US is almost 12 years old!
If your car is well-maintained, it will last longer and save you money. It also benefits the environment, since less pollution is emitted when the engine runs smoothly. Here are some tips on how to take care of your vehicle:
- Keep up with regular maintenance. Make sure that you get oil changes and other routine repairs done at a professional shop so that they’re done right.
- Check for signs of trouble before an appointment. If something doesn’t seem quite right with your vehicle, get in touch with an auto repair shop in advance to make sure they have time for you (and not just as an emergency). This way, if there’s anything wrong with your car that needs immediate attention before its next inspection, you’ll be able to take care of it at once instead of having an unexpected expense later on down the line—which we all know can happen when things go wrong unexpectedly!
The future for LKQ looks good.
I think LKQ is a great business model. I believe that it’s one of the most efficient ways to do business in the world today, and that it has tremendous potential for growth.
I have also found LKQ to be an excellent company to work for and invest in. As a shareholder myself, I’m confident that this stock will continue going up in value over time as more people discover how great it is!
Conclusion
LKQ is a great company with a business model that’s working well. They are able to manage the risks associated with the growing used parts market, and they have built up a strong balance sheet that will help them continue to grow for many years. The stock is currently trading around $160 per share, which means it has more than doubled over the last year alone! If LKQ can continue this growth rate, we could see another big rally in 2020 when earnings come out again next year.
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