7:50 am, March 13, 2025
In recent months it seems like every major dealer group has been taking an axe to its dealer network in one way or another.
In March alone Marshall Motor Group has already axed six sites across the country, with Group 1 deciding to close three.
That follows on from multiple closures of former Pendragon sites, after the group’s UK dealer network was snapped up by Lithia last year.
While some of the culls have been put down to performance, others are said to have been unrelated, leading many to question whether something deeper could be going on throughout the industry.
Annual accounts published over the past year have consistently shown profits to be down, with several bosses bemoaning wider economic difficulties and headwinds.
However, according to one expert, that is only one part of the story.
Carl Smith, of Zeus Capital, says that three key factors can be blamed for the rise in dealership closures this year.
As well as poor market conditions, Smith says that a high number of takeovers – largely by North American firms – is also playing its part.
He adds that larger groups, such as Vertu Motors, are feeling the impact of higher national living wage and employer’s national insurance contributions.
Smith told Car Dealer: ‘The recent dealership closures look to be driven by three factors.
‘The first is recently acquired businesses are being examined and the underperforming dealerships or those in duplicate locations are being closed.
‘The second is the poor market conditions in the private new car market, which Vertu has flagged as being worsened by the ZEV Mandate.
‘The third is the upcoming employment cost increases for dealers from higher national living wage and employer’s national insurance contributions, which is a material headwind.’
So, could this recent trend lead to American investors turning away from the UK motor trade? Cooper Parry’s David Kendrick doesn’t think so.
The automotive accountancy expert says that more deals remain in the pipeline with talks currently ongoing with another three potential backers from the other side of the Atlantic.
‘Do I think investors overseas will be put off by this? No not really,’ he told Car Dealer.
‘There are some seriously large groups out there now with all of the consolidation that has gone on, therefore wewould always expect some fall out from this.
‘Internationals must still see huge value in UK assets and there are still some nicely poised groups that would be excellent entry points – in recent weeks we have spoken with three new potential US and Canadian entrants so perhaps its not the end of this continued activity.’
Addressing the reasons for the potential closures, he added that dealers shouldn’t view the situation as a ‘national issue’.
He added: ‘Let’s not forget these groups have consolidated acquisitions into their businesses, so ultimately there may always be fall out – Vertu closing some of the smaller locations they inherited from the Helston acquisition, Marshalls perhaps tidying up elements from their growth pre-constellation deal, Pendragon acquired by Lithia and a tidy up ongoing there perhaps.
‘Whilst there is undoubtedly consolidation going on across the country and smaller, more marginal locations perhaps being closed, I do not believe this is a national issue.
‘The market conditions over the last 12 months have been tougher, especially with certain brands, therefore again this may have had an impact.’
‘If they’re not making money the easiest way out is to close sites down’
Several of the impacted dealerships have been sites which were formerly part of smaller, often family-run dealer groups.
Robin Luscombe, runs Luscombe Motors, which which holds franchises with MG and Suzuki from its single site in Leeds.
Suzuki itself recently announced plans to slash the size of its UK dealer network from around 130 sites to closer to 100.
Luscombe Motors was not affected by that change but sees wider closures as a symptom of smaller dealers being bought out by larger groups.
He said: ‘If you go back in history far enough – and unfortunately I’m old enough to – you will see that all the big PLCs and big groups of the 1980s have gone now.
‘They’ve all grown, got it wrong, got smaller, been swallowed up by somebody else or gone completely.
‘It’s a cycle of the big groups, because people go and buy profitable sites to add to their portfolio in order to buy some profit and make the figures look better.
‘They do make it look better until all of a sudden – as we’re getting at the moment – surprise, surprise, “Oh, we’re having to close this site. Oh, we’re closing that site. Oh, it’s not making any money. We’re closing that”.
‘I’d question all this stuff we see about these wonderful big groups. I just think if they’re not making money the easiest way out is to close sites down.
‘If you’ve got an independent, family-owned business in there, he’s got skin in the game. He’s got passion. He’s got everything tied up. Then he has to make it work. He’s committed to it and he can’t just go and do something else.’
‘We’re going to see a lot more of this’
The topic of closures also came up on the latest episode of the Car Dealer Podcast, with guest Phil Nothard, of Cox Automotive, weighing in on the debate.
The industry expert predicted that more closures could be round the corner, with dealer profits continuing to lag behind expected levels.
He also pointed to upcoming tax changes to corporation tax as a factor which could speed up the decision to close further showrooms.
Nothard told hosts James Baggott and Jon Reay: ‘There’s a lot of consolidation taking place with cost and market share pressures. You’ve also got the new entrants coming in that are shaking it up a little bit in terms of that market share.
‘You talk about Group 1 with the VW sites, but at the same time, they then acquired the Johnson Lexus Toyota sites. There’s a bit of a big re-cleanse and a realignment.
‘I remember speaking to Daksh Gupta many years ago when he was on that huge acquisition trail and it takes time.
‘You get them in and then you start to realign your locations, your brand partners, your duplications and things like that.
‘You see a little bit of that now with the Lithia, with their acquisitions and everything else taking place. They do the big acquisitions and then it’s, “Okay, right, what do I need? Where do I need it? What partner do I want?’.
‘Alongside that, you talk to Robert Forrester and he’s got a £10m pound cost coming into the business this year, through tax. There’s some big cost coming into these operations when you’ve got that size and scale. You’ve got to make some tough decisions of what you operate.’
He added: ‘You talk about Stellantis, you talk about VW Group but there aren’t many OEMs at the minute that are shouting about making a lot of money.
‘They’re all under a lot of pressure. The only ones [dealers] that are keeping very quiet at the minute are Mercedes dealers, because the dealers are not under the financial pressure because they’re under agency now.’
‘We’re going to see a lot more of this, particularly by the end of this month as we approach that April change of corporation tax and capital gains tax playing in.
You know, you talk about those owner-driver businesses. If they’re anywhere near doing a deal for cleansing some of their sites or selling, they’re going to be doing it before April. They’ll get out before the new tax comes in.
‘We are probably going to see a lot of this before the end of the month starts to happen but I don’t think it’s unique to any manufacturer per se.’
