Europe's big dealers keep getting bigger

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

The continent's top 50 auto retailers, with the Swiss company Emil Frey as the largest, increased their market share to 14 percent of all new vehicles sold last year, up 2 percentage points from 2019, the most recent year of normal sales, rankings published by automotive retail analysis firm ICDP show.

If the trend continues, Europe's largest dealership 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 is 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 the revenue posted by the groups to create its rankings. The growth came from reductions in new-car discounts stemming from inventory shortages and from the related boom in used-car values.

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

Winners included the U.K.'s Vertu group, which rose to sixth place on the ranking from 11th after its revenue increased 46 percent to $5 billion last year.

The financial bonus that resulted from the past two years of vehicle production cuts around the auto industry carried over from 2021 into 2022. For example, No. 7 Pendragon, also based in the U.K., reported a 60 percent increase in gross profit margin on new cars, rising to $3,078 per car, with an average selling price of $34,700.

Pendragon sold 52,782 new vehicles last year, according to ICDP data, compared with an estimated 250,000 for leader Emil Frey. Not all retail companies publish financial data.

The financial windfall generated by inventory shortages is likely to end when supply begins returning to normal in 2023 as manufacturers start pushing more volume to reclaim share lost to competitors that were able to produce more cars. That could spell trouble for dealers who push for discounts and incentives.

"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 dealership groups have grown by buying smaller rivals as they position themselves to better face looming challenges, including the move by automakers 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 roles to be unacceptable," Young said.

Big movements in store ownership include the May 2022 buyout of U.K. company Marshall Motor Group, ranked 10th, by Constellation, owner of the BCA car auction brand.

Through September this year, ICDP tracked 495 sales outlet acquisitions, with 123 coming from dealership 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 74 outlets from Stern Groep of the Netherlands. Hedin is also bidding to take over publicly listed Pendragon.

Big dealership groups remain concentrated in the U.K., Scandinavia, Belgium, the Netherlands and Luxembourg, while Germany and Italy are underrepresented in the top 50.

Despite being Europe's largest car market, Germany has only nine retail groups among the top 50. Its reduced presence in the ranking reflects the still fragmented and regionalized structure of store ownership in the market, Young said.

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

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

Automakers remain a powerful force in retail ownership within Europe but are slowly divesting themselves 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 factory-owned dealerships to independents in 2021, with more following 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, he said, and often have higher operating costs.