Emil Frey Group with its 33,000 new-car sales in Germany is the country's biggest and probably the most powerful dealer group.
"Big dealer groups such as Emil Frey are the trend," says IFA director Willi Diez.
Klaus Fricke, Emil Frey's managing director, says: "Size for its own sake is not our goal." He says he places more value on "being number one in customer service and profitability."
The IFA carried out the study for the International Car Distribution Program (ICDP), a European research project. The institute is based at Nuertingen-Geislingen University.
In 1997, there were just 600 large dealership companies with three or more locations. Today, there are 1,800 of these giants in the German market. About 420 of them are so-called megadealers owning ten or more stores.
They offer an average of five brands and more than half offer models from different manufacturers. In 2001, just 10 percent of large companies were multi brand dealers.
The groups' importance for the German auto market has grown along with their model lineups and volumes. In 1997, dealer groups had 28 percent of all volume brand sales. Now they account for half.
Their share of the luxury brands is still small. Mercedes-Benz and BMW prefer to sell through their own wholly-owned outlets.
But the dealer groups' impact is growing. According to the ICDP survey, the 50 largest dealer groups increased their new-vehicle sales 26 percent between 2001 and 2004, despite a stagnating auto industry.
Their market share rose from 10 to 13.5 percent. On average, a top 50 dealer group sold 8,000 new and 8,800 used cars annually, had 21 stores and employed a staff of 857 people. Average revenues were 350 million euros.
The largest European groups are in the United Kingdom. According to the study, the top 50 UK groups have average revenues of 800 million euros a year, and sell 22,000 new vehicles.
Pendragon, the largest UK group, sells 135,000 new vehicles a year and earned 2.6 billion euros.
Carmakers promote dealer-group growth
The study identified several reasons for the groups' growth in Germany. They include the rising number of insolvencies and the need for family-owned concerns to settle successions.
"These companies are potential takeover candidates," said Diez. Wealthy groups need consolidation to add new stores and model lines.
The study also saw a clear trend toward national, multi-brand dealer groups.
A recent IFA dealer satisfaction study reported that 28 percent of large dealers plan to open new stores when the EU's new block exemption regime takes effect in October. Only 14 percent of all dealers are planning to do that.
The institute says carmakers themselves are promoting dealer-group growth.
"Many automakers have come to an arrangement with the big dealers," said Diez. "That's because they can afford expensive sites."
One example was the Weller Group's investment of 18 million euros in a new Toyota dealership in Berlin.
The carmakers' sales and marketing efficiency rises with the increasing number of dealer groups.
Transaction costs drop for sales and distribution. Today carmakers spend about 10 percent of their revenues (not including dealer margins) in these areas. The study says costs have declined 1.5 to 2 percent.
But the dealer groups' growing power poses risk. Automakers can lose their leadership role in sales and distribution.
"The huge dealer groups keep strengthening their brands and reducing their dependence on manufacturers," Diez said. As a result, the dealer sector has greater potential for acquisitions.
Diez says some automakers are already highly dependent on large dealers' sales strength. "Due to our floor coverage, we absolutely feel that we are the preferred platform for car makers," agrees Emil Frey's Fricke.