BMW Is This Swedish Car Dealer’s Key to Doubling Sales in Europe – Bloomberg
Bilia AB’s partnership with Volvo Cars helped the Swedish auto dealer conquer the Nordic market. It’s hoping a similar alliance with German luxury car maker BMW AG will help make it big in other parts of Europe as it tries to counter slowing growth at home.
Bilia is counting on BMW to help double the portion of sales it gets from western Europe to about 20 percent “in a couple of years,” Chief Financial Officer Gunnar Blomkvist said in an interview on Tuesday. Its purchase last year of Schaefer GmbH Automobile, a German chain that sells BMW and Mini cars, has helped boost sales from western Europe to more than 10 percent of the total currently from 7.8 percent in 2016, strengthening a decade-old partnership Bilia has built with the Munich-based carmaker.
Bilia is on the hunt for at least four to six additional BMW dealerships in Germany, preferably north of Frankfurt, as it seeks to create a cluster of outlets sharing central functions and trimming costs in the process, Blomkvist said. The strategy hinges on BMW following a plan to pursue fewer but larger dealerships in the consolidating German automobile market and the carmaker continuing to support Bilia in its expansion efforts, he said.
“BMW gives us hints where there are dealers that can be for sale and we know that if we’re negotiating with a BMW dealer wherever in Europe, BMW will not say no to us and that is very important for us,” Blomkvist said. The CFO sees scope to quadruple revenue in Germany to 4 billion kronor ($451 million) in the coming five years.
Faced with slowing growth in a mature home market, Bilia is betting on regions outside its traditional Swedish and Norwegian enclave to help it reach a goal of annual revenue growth of 5 percent to 10 percent. The company is also eyeing acquisition opportunities in Belgium and Luxembourg, two countries it entered last year.
“We have a strategy to expand in Europe,” Blomkvist said, adding that he expects around half of all acquisitions in the next five years to be outside of Scandinavia.
The 50-year-old company can’t rely on the same level of support from key brands such as Volvo Cars in its home markets of Sweden and Norway as European Union regulations require automobile sellers to seek approval from brand manufacturers before making an acquisition. Even though Bilia would like to expand at home, Blomkvist said Volvo Cars would probably object to Bilia acquiring additional Volvo dealers because it would make the company, which already sells about one-third of all Volvo cars in Sweden and Norway, too big a player in those markets.
“It’s difficult for us to expand with existing brands in Sweden and Norway,” he said.
Another factor weighing on its growth potential in Sweden is a lack of qualified mechanics. The company needs a net increase of 70 mechanics to meet higher demand for services in coming years but is struggling to keep up with a personnel turnover rate of around 10 percent, according to the CFO.
“If we don’t find the mechanics in Sweden, our operating margin will decline,” Blomkvist said. “But if we get the mechanics, then we have the possibility to increase the margin” within the services segment from last year’s level of 11.3 percent, he said.
Last year, 71 percent of Bilia’s 841 million-krona operating profit came from its service business, which “is where we make the bulk of our money,” Blomkvist said.