TURIN – Automakers could face a financial hit in the hundreds of millions of euros in Italy from a forecast loss of 300 dealers in the country this year, experts say.
Italy's dealer network is contracting to adjust to a decline in new-car sales, which are expected to fall by 350,000 in 2010.
The closure of dealers should not affect automaker's overall unit sales because there will be enough dealers left in the country to make up for those losses.
The risk is that when a dealer goes bankrupt the automaker is likely to recoup just a fraction of the money it is owed for the cars and parts it has delivered to the showroom.
Experts disagree on just how high a price automakers will have to pay in Italy for the decline in dealers.
Luca Montagner, who monitors the Italian market for UK-based researcher International Car Distribution Programme (ICDP), said: “The total burden for automakers this year could be in the region of several hundred million euros.”
Giorgio Elefante, European automotive retail leader at PricewaterhouseCoopers, is more optimistic.
“It is obviously connected with the size of the dealer, but from a bankruptcy an automaker could recoup 20 percent to 30 percent of its credits, so the potential losses are in the low-single-digit millions,” Elefante said.
“My personal estimate is overcapacity in sales and service is about 25 percent in Italy,” Elefante added.
Montagner said that recently conducted financial sustainability tests show that some automakers could lose at least of quarter of their dealers in Italy this year.