Will mergers mean high prices?

30 November 2005

Reg Vardy dealer network up for sale
Pendragon in discussion to buy
Firm would own 250 dealerships if it wins

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The UK’s biggest car dealer is attempting to buy one of its largest rivals in a move that could trigger a series of mergers in the business.

Pendragon PLC has been in discussions to acquire the Reg Vardy dealer group and, if successful, will control more than 250 dealerships across the country – twice as many as its nearest competitor. Two other unknown bidders have also registered their interest in buying the Vardy business.

If completed, the deal would give Pendragon roughly 7% of all UK showrooms, nearly double its present network, and would account for 6% of new car sales in the UK. These numbers may not sound big, but will give the group enough power to negotiate preferential terms from manufacturers.

Industry analysts believe the move could see car dealerships start to mimic other big retail sectors, such as supermarkets, which in the long run could be bad news for buyers.

Professor Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff Business School, told whatcar.com: '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.'