LONDON - Major changes in the retail landscape are forcing thousands of European dealers to rethink, and in some cases reinvent, their businesses.
Some are starting operations, while others are pursuing higher volume.
Under the so-called "block exemption" regulation, the European Commission is forcing the industry to separate sales, service and parts. After 2005, dealerships will be able to locate wherever they choose. (See a summary of changes in the story below.)
In addition to the block exemption, there are many other changes:
"There will be more pressures for dealers to find other sources of profit,'' says Philip Wade of HWB International, a Warwick, England, consulting firm.
Christian Pace, who operates the Scai Motor GM dealership in Parma, Italy, has chosen to diversify. He has opened a used-car dealership called Scai Store, which sells used cars of different brands. And to capitalize further on growing used-car sales, Pace is negotiating to open a Bosch Car Service franchise, an aftermarket repair business.
"I have two major programs to prepare me for (the environment) after block exemption," Pace says.
Dealers worry most about splitting sales and service.
"In the service business nobody knows how it will work out because all the independent service stations will ask for a contract,'' says Fritz Haberl, retired CEO of the MAHAG group, a dealership group in Munich, Germany, that sells Volkswagen and Audi.
According to a survey by IBM's automotive consulting arm, 85 percent of fleet managers and 45 percent of retail customers in Europe would be willing to switch from a dealership to an approved brand-independent garage if the price were right.
Hans van der Sluijs, chairman of the Nefkens group, a large Dutch dealership group, plans to shop for more stores. These may come on the market, he believes, when many older dealers in smaller markets look to sell their businesses rather than invest the time, energy and money required to adapt to the complex new rules.
But it's tough to predict whether companies such as Nefkens will be better off getting bigger.
Max Warburton, an analyst at Goldman Sachs in London, says, "There is no compelling evidence from the U.S.A. that the largest dealers are the most profitable.''
While small-town dealerships may be sold to large groups, the stores will remain, says Wade, the HWB consultant.
"In places like Germany and Switzerland, they don't drive 30 kilometers to buy a car. They buy it from their local dealer," he says. "In a lot of Europe, people still shop very locally."
Jaap van den Broek, owner of a Citroen dealership in the provincial town of Deventer, Netherlands, is a case in point.
He envisions his future business looking much the same as it does today.
He sells about 200 new cars a year and hopes to increase that to 250 in five years. He plans to remain the owner and operator and keep his work force at seven.
Says van den Broek: "If you sell cars, you should keep service within your own company, not outsource it.''