Europe's retail network contracted at a slower rate than the region's car sales, report says

Europe's dealer network has contracted less than the car market since the onset of the 2007 economic crisis, a report says. New-car registrations in the region are 20 percent below the pre-recession peak of 14.8 million, but the number of company-owned and independent dealerships has fallen by 12 percent to 47,500 in western Europe since 2007, according to a Bernstein Research report.
Volkswagen Group, Renault and BMW were among the few European automakers that significantly downsized their retail networks during the downturn while Fiat and PSA/Peugeot-Citroen did less to reduce dealership numbers, according to the report. The loss of about 6,000 European dealerships since 2007 has reduced the average number of cars sold per dealership to 250 a year from 280 between 2005 and 2007, the report says. The breakeven point for a dealership is 150 car sales a year, according to UK-based auto retail analysts ICDP.

BMW and VW Group brands have “arguably the best dealer networks in Europe“ because they have maintained sales stability despite cutting their dealer numbers by 13 percent and 9 percent, respectively, from their pre-recession levels, Bernstein analyst Max Warburton says in the report. VW Group reduced its dealership numbers even though unit sales were stable, which means that the group”s 7,500 main dealerships now sell on average 380 cars a year, up from about 340 in 2005, the report said. BMW cut its main dealers by 13 percent to just less than 2,600 while Daimler kept its network stable at 2,400. Renault”s dealership numbers fell by 15 percent to 4,600. Overall dealer throughput dipped below 230 cars from about 270 in 2005 due to the sharp decline in volumes.
Fiat reduced dealership numbers by only 6 percent to a little more than 1,700, with average sales per dealer falling from a high of more than 500 in 2009 to about 300 in 2013. PSA has the “least efficient“ network despite a dealership cull of just 7 percent to 8,200, the report says. PSA”s sharp drop in vehicle sales means the automaker”s dealerships sold an average of 150 cars a year in 2013 across western Europe, down from more than 200 in 2007. The report did not look at the retail networks of non-European automakers such as General Motors, Ford and Toyota.

Passive automakers
 ICDP Managing Director Steve Young said Europe”s retail network has contracted mainly through dealers going out of business rather than through actions by automakers.
Dealers in mainland Europe have turned their focus more strongly toward used-car sales and aftermarket businesses, copying what their counterparts in the UK and U.S. have done for a long time. “The strength of the used-car market and robust aftersales revenue has prevented further widespread dealer closures,“ Bernstein”s report said.
ICDP”s Young said that used cars account for 10 percent of profits for mainland European dealers, compared with 25 percent to 30 percent for those in the UK and U.S. UK dealerships sell on average more than 500 cars a year, compared with the average of less than 250 in mainland Europe, the Bernstein report said.
ICDP”s Young expects that dealership numbers in Europe will decline significantly during the next five to six years as customer buying habits change and online sales become more popular. But automakers will try to keep the status quo for now. Said Young: “We do not expect many manufacturers – if any – to dramatically restructure their entire networks.“

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You can reach Nick Gibbs at [email protected].

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12.12.2014
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