PricewaterhouseCoopers, which believes groups like Pendragon and Inchcape are set to clean up, says consolidation will follow the trend set in the UK, where more than 2,000 outlets have closed over the past 15 years. The company last week singled out Pendragon and Inchcape at its Automotive Shareholder Value Awards as the top performing EU groups.
Pendragon, with outlets in UK and Germany, was named the best performing group over the past year. Its acquisition of CD Bramall in February helped deliver an increase in shareholder value of 132% against a sector average of 89%. Inchcape, with European business interests in the UK, Belgium and Greece, is the best performing over a three-year period, thanks to restructuring in the late 1990s which saw the group focus on car distribution and retail. It achieved a 259% increase in shareholder value compared to the sector average of 188%.
Block exemption and the strong domestic new car market are behind both groups’ strong showing – and they are expected to be among the beneficiaries from consolidation on the mainland. “The UK is much more consolidated than Europe,” says Philip Wylie, PwC automotive team leader – corporate finance. “The average dealer in the UK is more than twice the size of the average mainland European outlet and there are resultant economies of scale.”
Wylie believes continental dealers will be unable to compete until there is “very dramatic” consolidation. “We predict that at least half of the total number of retail outlets across Europe will ultimately shut,” he adds.