Motor industry consolidation – will less become more?

We examine how the automotive sector is adapting to meet the challenge of transformation.


It’s clear that consolidation has become a key issue for the automotive industry, affecting manufacturers, component suppliers and motor retailers. Whilst the business of developing and producing vehicles has always been costly, the current phase of industry transformation is taking investment to unprecedented levels.

In essence, transformation has become a core focus for manufacturers as they seek to address four disruptive technology-driven trends: consumer demand for diverse mobility options in terms of vehicle ownership and usage; autonomous driving; electrification; and connectivity. The drive to electrification alone is consuming eyewatering amounts of money with the Financial Times reporting that in 2018 the industry had committed $90 billion to developing battery electric vehicles. Volkwagen Group expects to spend $50 billion alone and Daimler, 25% of the size of VW, said it will invest some $20 billion on electrification.

Consolidation is a method of improving efficiency. The number of dealerships may reduce but what will emerge are stronger businesses that are better suited to the market.

These vast investment costs, alongside existing challenges such as sales volatility and increasingly stringent emissions legislation, are accelerating market consolidation among manufacturers as they seek the economies of scale needed to meet the demands of transformation. Examples include PSA’s acquisition of the Vauxhall and Opel brands from General Motors and the proposed merger between Fiat Chrysler and Renault-Nissan.

Technology consolidation is also increasing to meet the need for economies of scale with BMW Group and Jaguar Land Rover announcing that they are joining forces to develop next generation electric drive units.

Klaus Frölich, BMW Group’s Board Member for Development explains the rationale behind the new partnership: “The automotive industry is undergoing a steep transformation. We see collaboration as a key for success, also in the field of electrification. With Jaguar Land Rover, we found a partner whose requirements for the future generation of electric drive units significantly match ours. Together, we have the opportunity to cater more effectively for customer needs by shortening development time and bringing vehicles and state-of-the-art technologies more rapidly to market.”

Meanwhile, Ford and Volkswagen Group are also reported to be seeking to expand their agreement to cooperate on vans and pickup trucks into joint development on self-driving and electric car technology using Volkswagen’s MEB electric vehicle architecture.

Beyond partnerships, manufacturers are also actively seeking to consolidate their product ranges to free up the financial resources needed for transformation and the production capacity for next generation vehicles and their electric drivetrains, such as Mercedes-Benz ending production of the SLC roadster in early 2019. Audi is also considering ceasing production of its TT when the current version of the iconic sports car reaches the end of its lifecycle.

Consolidation is also anticipated to impact on motor retailers as they continue to adapt to changes in consumer buying habits and the shift towards online retail. According to findings by Cox Automotive, the majority of dealers expect at least 10% of dealerships in the UK to close within the next five years.

Philip Nothard, Cox Automotive’s Strategy Director, comments: “The role of the dealer is still crucial but we know that consumers want to interact with the automotive retailer in a variety of ways, notably via a range of digital platforms.” He concludes: “What’s clear is that consolidation is a method of improving efficiency. The number of dealerships may reduce but what will emerge are stronger businesses that are better suited to the market.”

Supporting dealers at this time of transformation and consolidation is important for third-party brands in the showroom such as Autoglym. As a leader in car care for over 50 years, Autoglym works with motor retailers across a range of brands and franchises, helping them secure incremental business through both LifeShine, the premium vehicle protection system, and a range of Professional products for the professional valeting market, all harnessing of the strength of the Autoglym brand.

To discover how LifeShine can generate incremental revenue for your dealership, please get in touch.


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