1. Lithia Motors (LAD) Consumer & Retail Group Andrea Wang, Bryant Johnson, Natnael Kassaw, Santiago Martin, Jorge Vasquez, Andrew Elott

2. Pitch Outline 1.Business Overview 2.Investment Thesis 3.Industry Trend 4.Company Strengths and Management 5.DCF Analysis & Comps 6.Risk 7.Conclusion

3. Business Overview An operator of automotive franchises and a retailer of new and used vehicles and related services. Founded in 1946 and went public in 1996. It’s based in Medford, Oregon. LAD also operates online at Lithia.com and DCHauto.com

4. Nationwide Geographic Footprint Three biggest states by revenue are Texas (20.7%), Oregon (20.2%), and California (15.8). 130 dealerships in 14 states

5. Investment Thesis Lithia Motors’ unique market position dedicated to rural markets, lack of competitors in these markets, strong, recession- tested earnings growth in the past years, diversified product mix, expansion potential through acquisitions, and huge used car market potential make it an ideal investment. The stock is currently underpriced.

6. Future Growth Strategy Lithia: exclusive franchises in medium markets for domestic/import stores and large markets for luxury stores DCH: extra large and mega markets to cluster domestic, import and luxury stores

7. Strong Growth

8. Industry Trend Consolidation is a dominant force in the auto dealership industry. o Lithia maintains its dominance by buying underperforming dealers, rather than unprofitable ones, in smaller geographic markets Consumer spending and interest rates drive demand for cars. o Lithia is stable given its operation segments are diversified Industry revenue: New car dealerships = 90% Used car dealerships =10% o Lithia derives more profit by selling the vehicle in the retail channel instead of selling it wholesale in auction The dealer sector is the best business in the automotive supply chain

9. Strengths Lithia's is the only large publicly traded dealer dedicated to rural markets.  Lithia has pricing power in spite of recessions due to demand inelasticity for cars in rural areas (can maintain positive EBIT) The October 2014 DCH gives Lithia its first East Coast presence  Lithia enjoy lofty gross margins on new vehicles, 100% gross margin on financing and insurance, and a steady stream of loyal customers  Revenue growth 14.1%; Strong earnings growth of 51.45%

10. Diversification Lithia is stable given its operation segments are diversified: Domestic, Import, Luxury, and Corporate and Others.

11. Management Mr. Sidney B. DeBoer is Executive Chairman Chairman, CEO and Secretary from 1968 until May 2012 Mr. Bryan B. DeBoer is President, Chief Executive Officer & Director on the Board of Directors Took the CEO reins in May 2012. Mr. Mark D. DeBoer joined the team in 2005 and serves as the Vice President of Real Estate at Lithia Motors Inc. He is the Co-Founder of DHD LLC. Co-founder of DHD LLC

12. Competitors Lithia vs. AutoNation, and Penske Automotive 2010-Present Total Returns

13. Peer Comparisons Market Cap (Mil) P/SP/EP/BPrice Lithia(LAD)2,7410.518.03.9104.09 AutoNation(AN)7,1800.416.93.362.97 Penske (PAG) 4,5810.314.62.850.77 Group 1 Automotive (GPI) 1,9630.221.72.081

14. DCF

16. EBIT Growth Rate: 23.69% EBIT Growth Rate: 28.79% EBIT Growth Rate: 33.89%

17. Risk Concentration of Sales in Texas where energy downturn could affect spending Exposed to cyclical industry risks Highly leveraged Decentralization Trend: Autonomy for local managers

18. Risk Acquisitions Cyclical exposure is not unique to Lithia Reducing total inventory even during expansion to reduce debt More autonomy for managers will increase sales and customer loyalty

19. Conclusion

20. Price Target: $129.0 per share Time Horizon: 12-18 months