Consolidation, Consolidation, Consolidation
Consolidations, mergers, acquisitions and divestments have been a permanent feature of the sector while I have been working in it.
Ford acquired brands, like Jaguar, and support businesses like KwikFit, in the 90s and 00s and then divested. Mercedes Benz merged with Chrysler, then years later, they parted company. BMW bought parts of the old British Leyland – they sold Land Rover but kept Mini.
More recently, Stellantis has grown to 18 brands in a relatively short time with the consolidation of PSA and FCA groups.
OEMs acquired the National Sales Companies run by third parties, e.g. Volvo and Hyundai from Lex Service, Mazda from MCL Group.
This is quite close to home as I worked with both businesses. In fact, the start of my consultancy business was facilitated by Pendragon buying Lex Retail Group in 2000. Back then, Pendragon was focussed on building a critical mass in car retail and Lex wanted to do the opposite, and focus on its other businesses, including RAC Motoring Services.
And, of course, in the UK, we have a small number of big groups such as Marshalls, Sytner, Vertu who appear to be acquisitive still.
But, in my opinion, this has been driven by the ‘normal’ flow of business. The industry has pretty much built and distributed vehicles the same way for 100 years.
However, there are forces at play right now that are changing the sector forever. And I wonder if there are people out there who have a vision of the future landscape and are building their business portfolios accordingly.
The ‘forces’ are clear for everyone to see, and I think there is no argument about what they are – although there are heated debates about their effects! I give you Agency…
But for the avoidance of doubt, we have:
- Electrification and their build costs.
- Digitalisation of the vehicle – the ‘connected car’.
- OEM / NSC direct sales and the ‘A word’.
- Digitalisation of the sales process, by OEMs, NSCs and Retailers.
- Customer expectations when compared with other retail experiences.
- New entrants such as Tesla, Cazoo and the Chinese EV makers.
- Mobility services and wherever that leads.
Taking all of that onboard and scrolling forwards ten years, it seems like the landscape would look something like this:
- OEMs distribute via omnichannel direct sales, for B2B and B2C.
- Their presence in each national market will provide the finance products and the cradle to grave logistics for the vehicles sold, leased, rented, borrowed, and shared.
- OEMs distribute through their own physical and online stores.
- OEMs distribute through third party, but brand specific, physical and online stores, also known as franchised dealers.
- Maybe, they’ll distribute through retail partners who sell all brands.
Think Apple or Titleist (golf equipment), who sell this way but also guard their brands and prices extremely effectively. And yes, they both sell big ticket items.
But Why Might Consolidation Be Different Now?
So how might this affect the thinking in organisations that support the sector. Leasing companies are well placed to provide personal leasing and some already do, LeasePlan for example. They have the processes and systems, although will have to scale for much bigger volumes of customer contacts – a personal lease is 1 consumer to 1 vehicle relationship. Business leasing might be 1 customer to 500 vehicles.
Then there’s the ‘fulfilment’ operators where consolidation has been rampant. Think Constellation Automotive Group with WeBuyAnyCar, BCA and Cinch.
You may be aware that LeasePlan and Constellation are part of TDR Capital’s portfolio, and who have invested heavily in this sector, and most recently carved out CarNext.com into a separate entity.
And then there’s Cazoo and its purchases of Drover, Imperial and SMH Fleet Solutions.
The Technical Challenge
Another key area where there has been plenty of activity is in the world of technical solutions. All players in the world of ‘Future Auto’ are working hard on their processes and systems because the new world requires different things. OEM ordering systems will have to be linked to their digital sales platforms. Their sales systems will have to work online and, in the store. They will need to work seamlessly between different legal entities and interface with their dealer managements systems, for example.
This has created demand for modified and new platforms. I suspect the OEMs behemoths will choose to do their own thing. It is a massive task to interface the ordering, stock and sales systems across multiple entities. Add to that the need for new processes:
- Data sharing across entities and countries.
- B2C contacts during the sales process – think chatbots, human chat, contact centres, retailers.
- CRM process to manage the connected car and the consumer ownership lifecycle.
- Some OEMs will build, other will buy
So maybe, like TDR Capital and Cazoo, the technical suppliers to the industry are gearing themselves up to provide that service to help OEMs and their partners deliver some clever solutions.