OpenRoad CEO Christian Chia says he expects dealer ownership consolidation to accelerate in the years to come as the barriers to entry grow larger for entrepreneurs.
Chia shared his views this week during a conversation with Canadian AutoWorld, noting that consolidation is a natural process in any industry that is as fragmented as the Canadian dealer body.
“Roughly 1,800 parties in Canada own 3,000 dealerships,” he says. “That is a very fragmented industry. And just the prospect of acquiring one dealership with an investment of $10 to $15 million is not something people are looking to do right now.”
He says the barriers go beyond financial, adding that the complexity of the business and the selective nature of the industry and automakers have changed the face of dealership ownership, perhaps forever.
“Every open point and purchase and sale has to go through a rigorous approval process by manufacturers and they are looking for a specific profile,” he says.
Fresh on the heels of a multi-billion dollar deal made by Warren Buffet that saw his Berkshire Hathaway buy the Van Tuyl Group, the fifth-largest car dealership company in the U.S., Chai says he doesn’t expect the U.S. megadealers to cast a gaze north any time soon.
Though it is a sign of things to come, he says, he don’t expect to see them in Canada that soon.
“I think they’ve all sniffed at Canada, but I don’t think they see the environment as attractive as that in the United States.”
Helping slow a U.S. domination in the market is the scale disparity with throughput and market size between the two countries. Chai says legislation is another major hurdle noting that the regulatory environment is much more attractive in the U.S. for dealers with its strong franchise legislation.
In 1998, Chia and his two brothers bought a group of four dealerships – two Toyota points, a Honda store and a Lexus dealership – in the Vancouver area. He launched the OpenRoad brand in 2000 and hasn’t looked back.
With a portfolio of 16 stores representing 15 brands, the group’s growth has been a steady incline for more than a decade.
His group recently purchased three downtown Vancouver dealerships - The BMW Store, MINI Yaletown and Rolls-Royce Vancouver – from Chicago-based Fields Automotive Group.
Look for the complete interview in the upcoming issue of Canadian AutoWorld.