How the Volkswagen settlements over its diesel emissions cheating scandal will affect VW dealership values depends on how the settlements affect dealership profits, according to an article in Automotive News.
Bumpy road: Most agree that buy-sell activity will increase because there’s a clearer picture of what will happen. But experts don’t agree on the valuation issue. Some say the settlements do not mean franchise values will increase. Others say the settlements could “cleanse” the brand, spurring new- and used-vehicle sales as well as service business, which could boost valuations. Also, some dealers will want to recoup their losses by not selling unless they get a higher premium than what’s currently offered. Experts also predict that VW will heavily push incentives to get customers on the lot and inflate revenues.
Some dealers are optimistic about the settlements and are watching dealership prices to scope out new acquisitions. But one dealer is not so positive—he saw his dealerships drop in value by 70% in the wake of $1 million in losses, and he sees the future as unclear.
Extra: BVR offers a guide, What It’s Worth: Automobile Dealership Value (an update to Key Trends Driving Auto Dealership Value), which includes contributions by auto industry accountants, brokers, M&A executives, former dealership employees and owners, and other consultants.
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