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Less choice for buyers as dealers merge

13 March 2006

  • Pendragon chain seeks to increase market share
  • Consolidation means dealers control prices
  • Car buyers lose as bargaining becomes harder

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The UK's biggest car dealership chain wants to continue taking over rivals in a wave of consolidation, which could result in car buyers paying more.

By taking over rival Reg Vardy, Pendragon will increase its hold on UK dealerships from 3% to 5% of outlets. It is currently involved in a hostile takeover bid for Lookers dealerships, which would increase its coverage to 6%.

Pendragon chief executive Trevor Finn says he wouldn't be satisfied with this, and told the Sunday Telegraph at the weekend: 'In the near term, we would like to see Pendragon with 10% of the UK market.

'It is a £100 billlion-a-year industry and is very fragmented, but in 10 years' time there'll be four or five big dealerships,' Finn predicted. 'This is still the beginning of the consolidation, not the end of it.'

Professor Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff Business School, agreed with Finn that the car market could come to be dominated by just a few companies. 'In the future, car sales could be controlled by a handful of big companies, rather than the current proliferation of small organisations.

'In the short term, consumers may get a better deal, as companies fight for market share, but in the long term the biggest players could control prices and charge buyers more.'

Finn pointed to changes in European block exemption rules covering car sales for the coming consolidation. Whatcar.com feared that the overhaul of the rules, in October 2003, could easily leave buyers with less choice and less opportunity to trade one dealership off against another in the search for lower prices.

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