02.06.2009

Number of UK franchised dealers set to fall

Car dealers are an endangered species and their number in the UK will be significantly reduced in the future, according to an industry analyst.

PricewaterhouseCoopers said the severe drop would be a result of vehicle manufacturers tightening control over dealership standards.

Chris Kent, a director in the automotive team at the PricewaterhouseCoopers, said he expected many more dealers to fold than had already this year.

Manufacturers have introduced ever-stricter standards for those who hold franchise agreements in an effort to exercise closer control over their brand’s corporate identity, he said.

“Such restrictions will cause some dealers to resign the franchise while others will be forced out, leading to a smaller pool of businesses representing each marque.

With current economic conditions already a serious threat to the viability of some dealerships, further closures seem inevitable.””

Kent added that competition for sales will remain fierce, however, with a broader range of car brands chasing what could be a shrinking pool of prospective buyers.

He said despite the factors of consumer and manufacturer demand, the wider economy was possibly the biggest influence at the moment.

Earlier this year, Grant Thornton’s Automotive team predicted that up to 20% (1,000 outlets) of vehicle dealerships in the UK are likely to face closure in 2009.

These comments by leading sector specialist accountants emphasise the importance of undertaking the correct due diligence when acquiring investments in this sector. That said, given the negative press surrounding the sector at this time, there are some attractively-priced opportunities now available. Indeed, long-term leases (circa 20 years) can now be secured at 9%+.