Rise in multi-brand dealers predicted to break automakers' stranglehold on new car sales

Geislingen, Germany. Multi-brand dealerships will increase significantly in Germany -- hitting the stranglehold that major automakers have on new-car sales in Europe.

That's the prediction of Willi Diez, head of the Institut fuer Automobilforschung, a German auto industry research organization.

Diez said that by 2010 there will be about 8,000 independent auto dealers in Germany and that 80 percent of those will be multi-brand dealers.

"In rural areas there will still be a few single-brand dealers in the future, but there is a clear trend, " said Diez.

"Investing in just one brand is too expensive for dealers. The auto manufacturers' blockade will break slowly. They will need to cooperate increasingly with multi-brand dealers. Otherwise certain brands will not have enough presence in some areas."

Diez said many dealers plan to take a brand that is not part of their own group to strengthen their independence. Brands that are prepared to be second brands -- such as Kia or Subaru -- are usually not part of a big group.

"Another reason for dealers to approach non-European brands is that manufacturers can prohibit multi-brand sales of its own group brands. Volkswagen does that: A VW dealer has no chance of taking Audi, Seat or Skoda models into his range if VW does not want him to."

Diez predicted that multi-brand businesses that adopt the so-called dualing/tripling concept will have the best chance of success.

"That means that there are either several showrooms on one site or one showroom with separate entrances," he said.

"The full multi-franchising, which means that several different brands are in one showroom, will not become the main format of multi-branding because of space reasons."

But Diez warned that multi-brand dealers faced risks.

"Complexity and costs increase with the number of brands. And it is difficult to have synergies when selling other automakers' brands," he said. "It is better to sell 200 cars of one brand than 250 of two brands."

Tags: Automakers

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