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Delays, consolidation and cooperation in the auto sector

Amid the uprisings caused by Covid and the shortage of world semiconductors, the automotive market is undergoing a period of structural change, with some sectors experiencing consolidation while others seeing new entrants to the market. This was reported by Chris Farnell

Consolidation of the dealer market is not a new phenomenon, but an expansion of the process that has been going on for decades, despite the fact that the market has grown.

“If you go back to 1976, there were twice as many franchise dealers as there are today, so the decline and consolidation is constant,” said Peter Kotley, head of the automotive sector. Groupup Ltd.. “But the interesting thing is that the number of dealers is half, but the remaining 50% sells twice as many cars.”

Dealers

One of the most notable deals recently was the acquisition of Marshall Motor Group by Constellation Automotive Group, which also owns Cinch and webuyanycar.com.

“The only part of the journey that they’s lacking right now is the financial services element, so we expect them to buy a financial company or enter into a partnership,” said Graham Wheeler, CEO. Advantages of Finance.

While the dealers themselves are consolidating, manufacturers also want more control over the front of their sales pipeline. Seven years ago there were 4,500 “roofs” (dealers sold more than one franchise under the same roof). There are now about 4,100 roofs and experts say this decline will continue.

Some OEMs want to reduce the number of franchise partners, while dealer groups want to maximize efficiency by merging brands where it fits in the same building.

“I was at Rover Finance from 1992 to 1997, and Rover and Land Rover had 700 dealers in 1992, but in 1996 they dropped to about 450,” Cotley said. “Given that most franchises now have between 100 and 200 dealers, it just shows how the market has changed and many small OEM stores just are not working, really not only for the OEM but also for the dealer. Adequate return. ”

At the same time, many small dealers are buying. Again, this is a no less sudden development than the product of the relative youth of the automotive industry.

“The automotive industry is still relatively new in relative terms. “In the 1920s and ’30s, there were founders of dealers whose grandchildren now run the family business.” “In the current environment, many small dealers say they can not get adequate pay, so they sell their property and crystallize the business. It is understandable the desire of small dealers to get out of the industry. They realize that the future will be more difficult for them, while larger groups can benefit from economies of scale. ”

That said, Cottley describes it as a natural product of the industry and not the death of a small dealer.

“I know many who are run by extremely strong management who have moved over time, are so passionate about their company and provide the best clients,” he says. “They can have a closer relationship with a community that is so well established and they are closer to their customers.”

Financial boundary

Although the automotive market dealer has undergone a consolidation process, the automotive financial sector itself looks very different.

The financial side of the industry remains an attractive prospect for new investors. Regulatory changes have had a greater impact on the business dealer and broker than on funders, and funders have far more control over what they can offer customers now that dealers can not change tariffs.

“Automotive finance remains a lucrative and attractive proposition, despite all the potential disadvantages of the automotive market. “Impact levels in the industry are much lower than expected after the credit crunch, and the growing help of credit decision automation has helped reduce fixed costs.” “However, well-established automotive finance businesses need to be very flexible to compete in this fintech world, and we have seen a number of new players enter the market in recent years and have been successful. Founded companies have, in some cases, quite awkward technology, so if you can get a continuous solution, these infringers need to take some action. ”

Newer players entering the market are typically present in the low-prime non-prime arena, while the premier sector is still dominated by big names such as Black Horse, Santander, Moto Novo and BNP Consumer.

“So while we continue to consolidate in the car retail sector, the number of companies offering automotive financing has increased, and the active brokerage sector remains equally active,” Cotley said.

The real way in the automotive finance sector may not be to consolidate or attract new companies, but to collaborate between industries.

“We have taken a slightly different approach to our funders, where we welcome as many donors as possible to consolidate our dealer network or expand their dealer base,” said Martin Potter, Managing Director. Aston Barkley. “In the last five months, we have added four major financiers to our automated process. We have a tripartite agreement between us, the clearing house and the finance house so that their specific dealers, when acquiring shares, can finance them with us immediately.

The Aston Barclay network already includes big names like Santander, Moto Nova and Vauxhall, but the company is adding additional financial houses.

“What’s quite interesting is that several market players are looking to collaborate or work together in specialized sectors,” Wheeler said. “You could have a super-prime lender, a major lender and an almost prime or sub-prime lender attacking the market together. So if Advantage Finance had a lot of applicants of a quality we could not afford, we could transfer them to a major lender, and while we can declare them, they could not handle it in terms of risk. “It’s more of a trend behind the scenes than a consolidation.”

The market is still undergoing changes and it is too early to say what it will be like in the end, but it remains an area of ​​opportunity.

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Delays, consolidation and cooperation in the auto sector

Source link Delays, consolidation and cooperation in the auto sector

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