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November 16, 2022 05:34 AM

Europe's top dealer groups get stronger

ICDP expects the region's largest car retailers to have a 20 percent share of the market by 2030.

Nick Gibbs
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    Emil Frey Avalon Premium Cars in Munich
    Emil Frey

    Emil Frey's dealership network includes Avalon Premium Cars in Munich (shown). The Swiss dealer group's estimated 15 billion euros in revenue last year was nearly double that of its closest rival in Europe.

    Europe's biggest dealer groups strengthened their hold on the new car market by boosting both share and revenue in 2021.

    The region's top 50 car retailers, led by Switzerland's Emil Frey, increased their market share to 14 percent of all new cars sold last year, up two percentage points from 2019, rankings published by automotive retail analyst ICDP show.

    If the trend continues, Europe's largest dealer groups are poised to beat ICDP's long-standing prediction that they will have a 15 percent share by 2025.

    By 2030, the top 50 biggest will account for 20 percent of all sales, ICDP predicts, as the biggest companies swallow smaller players and automakers prioritize relationships with larger groups.

    "The balance of power titling toward them," ICDP Managing Director Steve Young told Automotive News Europe.

    The top 50 groups boosted revenue by 17 percent in 2021, according to ICDP, which tracks posted revenue numbers by the groups to create the ranking. The growth came from reductions in new-car discounts stemming from shortages and the related boom in used-car values.

    "It was difficult not to make money last year," Young said.

    Winners included the UK's Vertu group, which rose to sixth to from 11th after revenue increased 46 percent to 4.2 billion pounds ($5 billion) last year.
     
    The financial bonus from the car production shortage has carried over into 2022. For example, No. 7 Pendragon, also based in the UK, reported a 60 percent increase of gross profit margin on new cars rose to 2,576 pounds per car with an average selling price of 29,036 pounds.

    Pendragon sold 52,782 new cars last year, according to ICDP data, compared to an estimated 250,000 for leader Emil Frey (not all companies publish financial data).

    The dealer bonus generated by the shortage of new cars is likely to end when supply begins to return in 2023 as manufacturers start pushing more volume to reclaim share lost to those that were able to produce more cars.

    "In the case of returning supply in a time of declining demand, my fear is that all lessons learned during the last two and half years will be thrown out," Young said.

    The big dealer groups have grown by buying smaller rivals as they position themselves to better face looming challenges, including the move by automaker to turn dealers into sales agents in return for a fixed fee.

    "Larger players will be more willing and able to adapt than smaller investors who may find the financial risk and change of role to be unacceptable," Young said.

    Big movements in dealer ownership include the May 2022 buyout of No. 10-placed UK company Marshall Motor Group by Constellation, the owner of the BCA car auction brand.

    Through September of this year, ICDP tracked 495 sales outlet acquisitions, with 123 coming from dealer groups based outside the country where the purchase took place. The companies making those deals include Emil Frey, Sweden's Hedin and the Dutch group Van Mossel.

    Last year's big cross-border purchases included Hedin's acquisition of the 74 outlets from Stern Groep of the Netherlands. Hedin is also bidding to take over the public-listed Pendragon group in the UK.

    Retail powerhouses

    Click below for a PDF of Europe's top 50 dealer groups

    Europe's biggest dealer groups, 2022 >

    Big dealer groups remain concentrated in the UK, Scandinavia and the Benelux countries, with countries such as Germany and Italy underrepresented in the top 50.

    Germany boasts just eight groups in the top 10, despite being Europe's largest car market. Its reduced presence in the top 50 reflects the still fragmented and regionalized structure of dealer ownership in the market, Young believes.

    "Germany still has a village mentality," he said.

    Italy meanwhile has just one group, Autotorino, in the top 50.

    Automakers remain a powerful force in retailing within Europe but are slowly divesting themselves of outlets as they look to free up cash. Mercedes for example has stated it wants to sell off its network, mostly concentrated in Germany.

    ICDP recorded the sale of 39 automaker-owned dealerships to independents in 2021, and it has seen further sales so far in 2022.

    "Manufacturers have shown themselves to be not good at retail," Young said. Automaker-owned networks tend to be less profitable as they are often first to be asked to sell excess inventory held by the automaker, and often have higher operating costs, Young said.

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