Pendragon PLC (LON:PDG) owns and operates automobile dealerships mainly based in the UK. As of December 31, 2010, it owned 245 franchise points, of which nine were in California. It earns revenue from selling new and used automobiles and has significant operations in vehicle leasing, wholesale parts, and dealership management. Its UK market has four sectors: aftersale services, used vehicle sales, new vehicle sales & contract hire, and other support businesses. It also splits into eight trading segments: Stratstone, Evans Halshaw, Chatfields truck business, California, and Support Businesses (which consist of Leasing, Quicko, Pinewood, and Central). Pendragon's revenues are influenced by fluctuating demand for luxury cars and legislative changes in the motor vehicle franchise sector.
The Motor Vehicle Block Exemption Regulation (MVBER) regulates franchise agreements in the motor vehicle franchise sector by suspending some usual competition rules in order to allow a Pan-European network of specialized distributors and retailers to become established run efficiently. However, MVBER expires in June 2013 and the motor vehicle franchise sector will no longer have exemption covering agreements. In June 2010, certain regulations of the aftermarket also took effect. All this combined will grant a more permissive competition regulation for the primary motor retail market. Since Pendragon is in the franchised business sector, its operations and revenues could be negatively affected.
With increased government austerity measures and the weakening euro, European markets have been slow to recover, leading to less disposable income for consumers to spend on luxury items. Pendragon's Stratstone has 98 franchise points and holds franchises to retail and service Aston Martin, BMW, Ferrari, Honda, Jaguar, Land Rover, Lotus, Maserati, Merces-Benz, MINI, Porsche, SAAB, and Smart. Many of these automobile brands are luxury brands and their demand fluctuates according to shrinking household budgets, which are impacted by the economic environment. As a result, Pendragon's businesses can be negatively impacted by weakened demand. However, with less demand for owning cars, consumers are turning to cheaper car alternatives, such as leasing, which benefits Pendragon's leasing services segment. With increased diversification to other automotive services, Pendragon has reduced dependency on a single revenue stream.
Pendragon plc has a diversified portfolio of services so no one business competes directly with all of its services. Its larger size compared to other car dealerships also allows it to realize economies of scale with bulk purchasing, its shared services center, central marketing, and IT capabilities.