Faconauto expects 200 car dealers to shut down by 2010 as the industry begins to consolidate to survive an increasingly competitive business environment, just-auto has been told.

Even though sales have been forecast to rise 1.8% to 1.53m vehicles this year, the Spanish dealership federation is predicting that they will fall 2.5% to 1.5m units in 2006, hurt by an expected jump in interest rates and higher oil prices. This, coupled with new European legislation enabling dealers to expand across the continent, is seen increasing competitive pressure.

Dealers will also have to prepare for the growing spectre of factory relocations to Eastern Europe, a process that will force them to import more cars, squeezing their margins. Already, manufacturers such as Ford and General Motors have moved production of some models outside Spain to reduce costs.

"The sector is consolidating to gain scale and increase efficiencies," a Faconauto spokeswoman said, adding that small dealers are most likely to team up to adapt to the new market.

In five years, Faconauto expects merger and acquisition deals to trim Spanish dealerships to around 2,500 from 2,998 currently.

Ivan Castano