Share prices of Europe’s largest listed dealer groups have risen dramatically in the past year, indicating that investors believe big retailers will benefit from changes to the regulatory environment, Automotive News Europe reported.
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In the last 12 months, the share prices of six of the 10 largest car retailers in Europe have increased by more than 50%, two by more than 25% and only two less than 25%. Eight of the 10 are British companies.
Changes to the European Union’s so-called Block Exemption rules took effect on October 1. Big retailers expect the changes to give them more stability and independence. Booming car sales in the UK are also part of the positive picture, analysts say.
Philip Wylie, the head of the automotive industry team at PricewaterhouseCoopers Corporate Finance, said share prices are up because investors expect new Block Exemption rules to benefit larger players. They will “achieve more economies of scale and will expand by buying smaller companies,” he predicted.
Wylie said expansion will put bigger retailers in a stronger position vis-a-vis the car makers.
“The vehicle manufacturers still have power over the big dealers, but their power is being diluted.”
In the last two months, several of the big dealer groups have talked up the new contracts that came into force on October 1. They say they will benefit because manufacturers can now no longer terminate a franchise without cause or assign exclusive sales territories. This frees the hands of large retailers to expand.
Many have already been acquiring other dealerships and this will give them more power to negotiate favourable discounts with manufacturers, Automotive News Europe said.
