Dusseldorf The car trade in Germany is facing a concentration process: Smaller companies have to give up and are bought up by larger car dealers.
According to a recent study by the Institute for the Automotive Industry (Ifa), which specializes in car sales, only 3,900 of the current 6,800 car dealerships in Germany will remain by 2030.
“Consolidation will accelerate,” says Ifa director Stefan Reindl. The professor speaks of a “centralization in the car trade”. Larger retail groups will continue to gain in importance in the coming years. In larger metropolitan areas, more and more “regional top dogs” would emerge, which would then dominate the car business there.
The pressure from the car manufacturers ensures that more and more smaller dealers disappear from the scene as independent companies. Smaller companies find it difficult to meet the growing demands of corporations. Manufacturers prefer to work with regional heavyweights. Streamlining the sales network is now part of everyday life for most car brands.
Only recently the Hamburg Dello Group announced the takeover of the Lensch Group, which is active in neighboring Schleswig-Holstein. Dello was already one of Europe’s largest Opel dealers. With the Lensch branches, Dello is expanding this position even further.
Regional top dogs are growing in other regions
The Volkswagen dealerships form the largest dealer network in Germany. In the past, the basic rule was that at least 1,000 dealers belonged to the VW network in Germany. Due to the ongoing selection process, there are now only a good 800 companies left.
Most recently, the Tiemeyer Group from Bochum, one of the largest German dealers in vehicles from the VW Group, had taken over the smaller Piepenstock Group from the Sauerland bordering the Ruhr area. From the Ruhr area, where Tiemeyer is traditionally strong, the group is expanding into neighboring regions. This is also a trend in the industry. With Piepenstock, another independent dealer disappears from the market.
Smaller car dealers are finding it difficult to survive under the growing competitive pressure. With electromobility and the digitization of vehicles, not only the car manufacturers are facing drastic changes. The dealers also have to adapt because there is no longer an oil change with the electric motor, for example.
In customer service and in the workshop, software experts are needed who can explain digital services and, if necessary, update them. “With electric cars, the classic workshop business is getting smaller. This will primarily affect the brand-related trade,” expects Ifa Director Reindl. However, the car trade is faced with the next problem: there are already too few specialist staff for the new services.
Many dealers and workshops continue as independent companies
The concentration in the car trade can be seen from the statistics: Of the 18 most important make groups in Germany, only three car brands have expanded their network with independent dealers this year compared to 2021. A few brands report a tie, the majority of manufacturers saw a downward trend in the number of dealers.
This does not mean that dealers who leave a manufacturer’s distribution center will disappear from the scene forever. Such mostly smaller companies try to survive as independent dealers or independent workshops without being tied to a car brand. This is indicated by the fact that the number of non-brand companies in Germany rose by 130 to 22,110 last year. “Obviously, numerous, formerly brand-related companies are continued as independent companies due to the loss of dealer or service contracts,” says the Ifa study.
From the perspective of the car researchers, the current crisis situation is likely to further intensify the pressure on dealerships and speed up the selection process even more. Not only will the number of independent companies decline, but also the number of branches. According to the Ifa researchers, anyone who gives up a business location can significantly reduce costs.
The 100 largest German car dealerships sold around 726,000 new cars in 2021. This corresponds to a share of almost 28 percent of the entire German new car business. In previous years, the proportion of the 100 largest dealers was a lot smaller. In 2020 it was 25 percent, in 2019 the rate was a good 21 percent. “A trend that suggests a continuation of the consolidation in brand-related automobile trade,” says the Ifa study.
>> Read here: This is how dealers deal with a shrinking car market
The scientists from Geislingen, Württemberg, identify the low returns in the car trade as a central problem area. The 100 largest German car dealers achieved a pre-tax return of just 2.3 percent last year. This is a little better than in the first Corona year 2020, when the largest German car dealers had achieved a return of 1.6 percent.
Only the workshop business brings real returns
However, with such a low rate of return, it becomes difficult to ensure long-term survival. Then it is hardly possible to raise the necessary investments and, for example, to meet the requirements of the manufacturers for the equipment of the car dealerships. In actual vehicle sales (new and used cars), the companies earn the worst. The spare parts and workshop business, on the other hand, ensure that the coffers are fairly full.
In order to cope better with the changes, car dealers should pay more attention to their own profile and “create make-independent potential”, say the Ifa scientists. In the course of further consolidation, the car dealers should also work on their own efficiency. After the takeover of smaller dealer groups, there are often opportunities to reduce costs, especially in the administrative areas.
Jürgen Stackmann, Director at the Institute for Mobility at the University of St. Gallen and former VW Sales Director, recommends that car dealers focus more on a regional basis. “It’s extremely important,” emphasizes Stackmann. Those who are strong in their own region can cope better with the upheavals in the car trade. Anyone who has lost their dealership contract with one of the established car companies can try a new provider such as Tesla or the Chinese manufacturers. “The new competitors also need service partners,” says Stackmann.
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