Soros Looking to Enter the Auto Dealership Industry

The auto dealership industry has become much more interesting lately, after Warren Buffet announced plans to acquire the largest auto dealer group in the country, and a few more investors publicly saying that they are ready to follow suit. Now, George Soros seems to be the latest business magnate to be interested in entering the car dealership game, with Automotive News reporting that the Hungarian-born investor is looking to acquire an auto dealership group, and intensify the competition in this industry.

According to the report, Soros Fund Management, the famous billionaire's investment management firm, is ready to invest about $1 billion to buy several car dealerships. The report says that representatives of the investment fund met with people from the National Automobile Dealers Association in San Francisco, to discuss investment opportunities.

If Soros really moves on auto dealerships, he will take a somewhat similar approach to what Warren Buffett did. Buffett's Berkshire Hathaway investment company will probably not want to have complete control of the operation of the dealership group it bought, and Soros is likely to stick to the partner role, as well, and will only focus on capital strategies, as the report says. Automotive News reported that Vipul Tandon, a representative of Soros Fund Management, said in the speech at the National Automobile Dealers Association convention that the fund will not do what a typical private equity fund would do in this type of situation, since it's a family fund that isn't interested in taking part in the decision-making process on a daily basis.

The reason why Soros wants to invest in auto dealerships is similar to Buffett's reason - the growth potential in this industry, which has been detected by many global investors. With the economy showing strong signs of recovery, and the auto industry benefiting from it, car dealers are once again becoming an attractive target for investors. Consumers' purchasing power has increased, so buying a car is now an investment that more people can afford to make, unlike a couple of years ago, when the economy was in a pretty poor shape. This means that dealerships are set to see significantly increased profits, and some of them have already felt the impact of the U.S. auto industry growth.

According to many industry observers, auto dealerships offer an opportunity for higher returns than other businesses, thanks to the diversified revenue streams, which include financing, maintenance, and insurance, on top of new and used vehicle sales.

If Soros goes through with his plans to acquire a group of auto dealerships, he will become a serious rival to the group recently bought by Buffett, and will certainly contribute to the consolidation in the industry even further. The consolidation process will probably continue in the next few years, with more powerful investors coming in and taking over the small, usually family-owned businesses, similarly to what has been happening in the broadcasting industry. That's why it can be expected that more and more independent auto dealerships will be going out of business over the next decade or so, until there are only a handful of powerful corporate entities controlling the entire car dealership industry.