Inchcape has announced that its will leave the Chinese car retail market with the sale of its Lexus, Porsche and Mercedes-Benz dealerships in the country for over £54 million.
The global car retail and distribution business, which also owns Inchcape Retail in the UK, entered the booming Chinese market 12 years ago but revealed in a statement issued via the London Stock Exchange yesterday (October 2) that it was withdrawing as it focussed on its core distribution capabilities as part of a “disciplined utilisation of capital”.
The move follows Inchcape’s recent rationalisation in Australia and the UK, which it said would optimise its retail-only portfolios, while generating over £150m through the disposal of a combined 16 sites.
As Netto reported in August, Inchcape disposed of five Volkswagen car and van franchises - in Chelmsford, Colchester, Romford and Southend - to Group 1 while Motorline trebled its Audi representation in Kent with the acquisition of a further two dealerships sites following its earlier purchase of the Canterbury East Kent Audi business in June last year.
The UK disposals came a fortnight after Inchcape Retail chief executive, James Brearley, denied suggestions that the group planned to cut its UK retail network by 20%.
This week’s disposal of retail sites in China will see Inchcape’s global business dispose of Lexus in Shaoxing, Porsche in Nanchang and Mercedes-Benz in Jiujiang.
“Prospects for Inchcape’s Distribution business across Asia remain highly attractive and the region a key contributor to the Group,” the group’s statement said, adding: “Net cash proceeds of £54m represents a gain on book value.
“The transaction is expected to complete by Q1 2020 and is conditional upon final OEM partner and regulatory approvals.
“Given the timing of completion we expect minimal impact to 2019’s trading profit with the business expected to contribute c.£9m to Group trading profit.”
Commenting on the withdrawal from the Chinese car retail sector, Stefan Bomhard, Inchcape’s PLC’s group chief executive, said: “The disposal of our three remaining sites in mainland China marks a further shift towards focusing on our core distribution business model, thereby allocating our resources towards more attractive profit pools in the Asia region.
“Through the Ignite strategy, our focus is on growing both organically and inorganically in Distribution as evidenced through the 10 businesses we have won and acquired since 2016.
“The global opportunities for Inchcape are exciting; whilst we exit three retail sites in China today, through our acquisitions to date we have become a top five distributor of Chinese OEMs across the markets we operate in Latin America.
“We remain focused on ensuring we are driving value for shareholders today and for the future.”