Auto makers in Canada will face pressure in the coming years to allow publicly traded companies to buy their dealerships, a practice currently banned by some of the industry’s biggest players.
At the moment, Toyota Canada Inc., General Motors of Canada Ltd. and some other auto makers are allowing only private entities to purchase dealerships.
But a large number of auto dealers – more than two-thirds – are planning to move into semi-retirement or get out of the business entirely in five years, a conference of dealers was told on Wednesday. And that transformation is likely to drive publicly traded U.S. companies in the business to target the Canadian market for acquisitions.
“I just don’t know how the car companies in Canada can [continue to]avoid it,” said Damian Peluso, national automotive industry leader for PricewaterhouseCoopers LLP, which organized the conference.
Group 1 Automotive LLC, the fourth-largest publicly traded U.S. dealership group, has already looked at acquisitions in Canada but doesn’t own any retail outlets here yet, Mark Iuppenlatz, vice-president of corporate development told the conference.
Group 1 has a wide range of brands, about half of which are Toyota. Toyota has told AutoCanada Inc., Canada’s largest publicly traded group, that it cannot own Toyota stores.
“The automotive retail business is changing all over the world and eventually that will probably make its way to Canada,” Mr. Iuppenlatz said.
Pricing and real estate issues caused Group 1 not to consummate the Canadian deals it examined, he said.
“We’re very picky. We probably look at 100 opportunities for every five that we buy. We may have looked at a few here, but not enough to really find the gems that we’re looking for.”
AutoCanada owns mainly stores selling Chrysler Canada Inc. vehicles, with a handful of Hyundai Auto Canada, Nissan Canada Inc. and other brands.
Pat Priestner, AutoCanada’s chief executive officer, said the Edmonton-based company has been making some progress on convincing other auto makers to change their policies. But it might take the entry of Group 1 or Penske Automotive Group Inc., or another large U.S. group, to force a change in policy, he said. Mr. Priestner persomally owns a Toyota dealership, but purchased it only after Toyota refused to approve its sale to AutoCanada.
“I’m hoping you guys come up tomorrow, actually,” Mr. Priestner told Mr. Iuppenlatz.
A lawsuit might be necessary to get some auto makers to change their minds, added Michael Croxon, president of NewRoads Automotive Group, a privately-held chain that holds GM, BMW Canada Inc., Kia Canada Inc. and Subaru Canada Inc. franchises north of Toronto.
“Probably one of the big U.S. groups is going to come up here and say ‘I’m taking you to court,’ “ Mr. Croxon said.