Mergers and acquisitions in motor retailing were worth $689m last year, compared to $2.4bn in 2002, says a new report from PriceWaterhouseCoopers.

PwC's latest survey of automotive mergers and acquisitions reports that the total value of deals in the automotive sector fell by some 40% from $35bn in 2002 to $21bn last year. Despite this decline in value, the number of transactions held steady, with 588 transactions in 2003 compared to 621 returned in 2002 - a record year for deal completions.

The component supplier sub-sector accounted for most of the total automotive M&A activity last year, accounting for 61% of the total value and 45% of the deals in the entire automotive sector, respectively, in 2003.

Although 262 components companies were acquired during 2003 – approaching the tally of 274 for 2002, the combined value of these deals fell from $16.3bn in 2002 to $12.8bn last year. Average disclosed deal values in the components sector fell to $109m (2002 - $125m).

Philip Wylie, Automotive Corporate Finance Leader at PricewaterhouseCoopers said: “With intense competition among vehicle manufacturers, caused primarily by over-capacity, there is a continuing squeeze on component makers. Further consolidation will be a key factor in the survival stakes.”

There was a hiatus in larger deals in the European vehicle-retailing sector ahead of the introduction of the EU's revised Block Exemption rules in September 2003. Consequently, total deal values fell to $689 million from $2.4 billion in 2002. However, transaction numbers increased slightly, from 127 in 2002 to 135 last year, as small in-fill acquisitions continued. The data reported excludes the 2004 acquisition of CD Bramall by Pendragon plc.

Even the largest dealership groups still have relatively little purchasing power over the VMs, and as a result PricewaterhouseCoopers believes consolidation of the European dealer sector is likely to be relatively gradual rather than explosive.