Crunch Cranks Up Consolidation

The release of Pendragon’s trading figures for 2009 and optimistic pronouncements from other dealer groups suggest that the sector is accommodating itself to the post-credit crunch environment. But could this result in less choice for consumers?

Pendragon, in particular, has responded with impressive rapidity to the changing situation; managing to turn 2008’s losses of £194 million into a modest but highly significant profit of £1.3 million for 2009.

The supergroup has done this by ruthlessly closing or disposing of 26 of its lesser performing dealerships. And, at the same time, by achieving new car sales which fell by just 3.2% in a market place which shrank by 6.42%: a very impressive achievement.

Others of the more successful groups have made some headway during this tough period too. Vertu and JCT600 in particular have recently announced acquisitions of less successful small groups and independent traders, as they benefit from others’ adversity.

The current period in some ways will accelerate a process which has been evident for some time – the increasing consolidation of the sector. After the dust has settled we shall see that there are fewer of the small to middle size dealer groups; a larger proportion of sales will be achieved by a smaller number of increasingly larger groups.

In the 2008 / 2009 period alone, Pendragon have increased their share of all UK new car sales from 5.1% to 5.3%. More than one in twenty of all new cars in the UK are bought through a Pendragon group outlet.

However, the fact that Pendragon have considered it necessary to dispose of so many dealerships in the last year may mean that there is a practical limit to of growth.

7/3/10