Small car dealerships are banding together to prepare for competition from bigger dealers following the ‘location clause’ ban, which allows dealers to set up in each others territories.

Small and medium size dealers are likely to be hard hit by the new rules as they struggle to compete with the larger and better funded dealers.

A 20 strong dealer alliance has already launched a Joint Venture (JV) Company and includes Essex Ford Group, T. C. Harrison at Derby and G. K Group in Nottingham.

James Kelsey, a member of the motor trade sector group at national accountancy group UHY Hacker Young, said: "In effect, this move means dealers can set up additional outlets where it suits them.

Although it's meant to increase competition and give customers a better deal and more choice, only the big retailers will benefit. Ultimately, smaller retailers won't have the financial strength to take advantage of the new rules and could find themselves squeezed out as the large operators move in on their territory.

"It'll be almost impossible to compete on price, but dealers should consider introducing new services and improvements in customer service."

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