Lexus lifts cap for number of stores dealership groups can own

Article by Andrew Christian, on June 30, 2014

Dealerships for Lexus could now own up to eight retail stores, up from the previous cap of six, several people having knowledge of the matter told Automotive News. This means that dealership groups already having six stores could expand their outlets by up to two more, bringing in more opportunity to attract more potential buyers.

Lexus’ decision to remove the cap could spur Lexus dealership acquisition activity. Erin Kerrigan, managing director of Kerrigan Advisors dealership brokerage firm, told Automotive News that lifting the cap will increase the value of Lexus franchises since “the most well-funded buyers” who were already at the limit could now acquire more.

Sources with knowledge of the matter provided two reasons for Lexus’ move. First is the pressure from dealers, who may have felt that cap limited the value of their stores since some of the most active acquirers were on the sidelines for Lexus transactions.

Likewise, potential buyers felt discouraged by the factory. Second reason is plans by Lexus to expand its dealership network, which could be achieved by lifting the cap. Also a higher cap allows Lexus to award new points to top retailers already maxed out.

Some dealership groups have already confirmed that looking forward to acquire Lexus stores again. Tony Pordon, executive vice president of investor relations and corporate development for Penske Automotive Group Inc., told Automotive News in an e-mail that Lexus fits well within their brand mix, adding that if there is an opportunity, the group would be “interested in learning more.”

He confirmed that Penske had been at its limit. Lexus posted a 19-percent surge in sales in the United States in the first five months of 2014, outpacing its rivals and the overall auto industry in the country. [source: automotive news - sub. required]

Topics: lexus, dealership

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