Europe's top dealers tighten grip on market

Europe's top 50 dealer groups have gained a tighter hold on the market after increasing their average number of outlets and boosting revenue in 2022, new figures show.

The largest groups, topped again by Switzerland's Emil Frey, increased their share of the new car market to 15 percent, up from 14 percent the year before, after increasing sales 3.6 percent in a market down 5.9 percent, data from dealer analyst company ICDP show.

The consolidation trend has moved faster than even industry watchers such as ICDP predicted, with the company now estimating that a fifth of all new cars will be sold in Europe by the biggest groups by 2030.

All dealer groups in the top 50 posted revenue of more than 1 billion euros in 2022, according to ICDP, which uses the revenue figures to create its ranking.

The average revenue for the 50 biggest groups was 2.8 billion euros, up 9.6 percent on the year before, according to ICDP data.

Emil Frey topped the charts with revenue of 14.8 billion euros, followed by Penkse's U.K.-centered European operations at 9.2 billion euros.

ICDP uses estimates if the companies don't provide detailed figures.

Overall revenue grew partly as a result of the increase in the number of average franchise outlets, which reached 141 in 2022 within the top 50 groups, up from 124 in 2020. ICDP calculated that 825 outlets changed hands in 2022.

Revenue was also boosted by higher prices for new cars amid production bottlenecks. Used car sales were down at a ratio of 1.14 used cars for every new car sold, compared with 1.35 to 1 in 2021, but dealers reported higher average sales prices for those used cars they could source.

The pace of consolidation has increased again in 2023 with 1,312 outlets changing hands so far, ICDP said.

As the business of selling cars comes under scrutiny from automakers looking to cut cost from the distribution side, the efficiency offered by big groups can help turn around unprofitable sales points.

Automakers also prefer doing business with the bigger groups.

"It's a lot easier to get a relatively small number of dealer groups around a table and have a discussion with them, rather than a disparate group," ICPD Managing Director Steve Young said.

The pace of consolidation is mostly unconnected to the shift to the direct sales agency model, Young said. The move to agency, whereby automakers sell cars direct to consumers with the dealer accepting a flat fee per sale to facilitate the process, could even help smaller dealers.

The automakers' aim under the agency model to offer cars at a fixed price will mean consumers are more likely to choose their closest dealer over a bigger outlet that might give a greater discount under the traditional wholesale model.

However, the wider difficulties of doing business right now could persuade an increasing number of smaller groups to sell.

"You might get some dealers who look at agency in conjunction with electric vehicles, the weak market and the high cost of finance and decide to exit," Young said.

The impressive sums made by dealers in 2022 when poor availability of new cars boosted the average sales price is not continuing into 2023, Young cautioned.

"All the dealers we speak to are seeing profitability down significantly compared with last year," he said.

The return of discounting to shift excess volume amid a sluggish market could also drive dealer consolidation by forcing over-valued businesses to cut their sales price.

"Most people buying are looking at numbers from 2019, not 2022," Young said. "Business is tough, and this will put pressure on private groups to sell."