Swiss dealer group Emil Frey rises to No. 1 on big deal with VW Group

Emil Frey increased European franchise points nearly 70 percent. This dealership in Safenwil, Switzerland, is one of the company's 678 locations.

Photo credit: Photo: Reuters

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Switzerland's Emil Frey is now Europe's biggest dealer group based on revenue after last year's purchase of 275 sites from the Volkswagen Group, according to a report by dealer analyst ICDP.

The purchase of largely French sales outlets from VW Group's Porsche Holding Salzburg retail chain elevated Frey to No. 1 from fifth place, overtaking the U.S.-owned Penske Automotive's European arm, as well as UK-based heavyweights Pendragon, Lookers and Inchcape Europe.

The purchase boosted Emil Frey's franchise points nearly 70 percent to 678 and its revenue to 11.1 billion euros in 2017 from 4.7 billion euros, ICDP reported in its European Top 50 Dealer Groups 2017 study (see PDF file, above right, for chart). "The dramatic rise of Emil Frey is the big story," ICDP Managing Director Steve Young said.

Frey might have overtaken the big UK groups but like many on the Continent it continues to look to UK innovations to modernize its business, Young said. "They still tend to respect the practices and success of the UK groups," he added.

Stabilizing factors

By pursuing digital strategies and used-car sales, the UK groups are stabilizing revenues as the country's new-car market falls in response to Brexit fears. "Pushing further into used cars means they are riding it out OK," Young said. Last year sales of used cars by the 10 biggest European dealers rose 22 percent to move past 1 million for the first time. The big groups have sold more used cars than new every year since 2013, but this year the gap was almost 200,000, the widest it has been. Together the top 50 dealer groups account for a little more than 10 percent of the European new-car market.

In the UK, Pendragon opened seven used-car dealerships last year. Separately it has launched a number of so-called "used-car factories" that are dedicated to refurbishing previously owned models. "The used market is more stable and provides a more reliable supply chain than the new vehicle sector," it said in its 2017 annual report.

U.S. group Penske, Europe's second-biggest group due mainly to its UK operations, bought out used-car group CarShop's five UK stores in 2017.

UK dealers remain attractive to firms such as Penske and other companies based outside the country because of the weak pound, Young said. Another firm pushing into the UK is Hong Kong-based Mercedes-Benz specialist Lei Shing Hong group. LSH is also expanding into Germany via its Stern Auto Gruppe. The moves helped LSH rise into the top 50 for the first time, finishing last year at No. 28.

LSH has benefited from Daimler’s continued sell-off of its dealerships, which are down to 11 in both France and the UK from 15 and 14, respectively, in 2016, according to ICDP. In Germany, Daimler's disposal program leaves the company with 52 full-function sales and service outlets, down from an estimated 77 in 2016.

Swiss-based Merbag's Daimler acquisitions, including Mercedes' Luxembourg operations, have pushed the group's franchise outlets to 97 to move it into the top 50 for the first time at No. 37.

Continued strength

Automakers remain a big force in dealership ownership, with VW Group's Porsche Holding Salzburg still with 453 dealers despite the sell-off to Emil Frey. PSA Group was next at 277, with Renault at 132.

In the UK, Ford runs 50 sites under the TrustFord brand, down from 55 in 2016. ICDP expects automakers to continue to divest sites. Said Young: "Our research clearly suggests that automakers will have a more direct customer contact in the future, but there is no evidence that any are translating this into dealer ownership and following a Tesla-style model."

Tesla CEO Elon Musk has chosen to circumvent the traditional franchised auto dealer model in the U.S. and elsewhere, opting instead to enable customers to order online and shop at company-owned stores.

You can reach Nick Gibbs at ngibbs@crain.com.

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