Lithia Motors and Pinewood Plan Joint Venture to Bring DMS to North America
Lithia Motors Inc. has announced a significant deal with the purchase of the dealership and fleet businesses of Pendragon, one of the largest auto retailers in the United Kingdom. This deal, valued at $4.5 billion in annual revenue, brings Lithia closer to its goal of $50 billion in annual revenue by 2025. The crown jewel of the deal is Pendragon’s dealership management system (DMS), Pinewood, which will be transformed into a standalone software company called Pinewood Technologies. Lithia will have a one-sixth ownership stake in Pinewood Technologies and plans to form a joint venture to bring the DMS to North America.
Expansion and Diversification
Lithia’s CEO, Bryan DeBoer, stated that this deal marks a significant step towards the company’s expansion and diversification goals beyond 2025. In addition to the acquisition of Pendragon’s businesses, Lithia has already entered international markets with the purchase of Canada’s Pfaff Automotive Partners and the acquisition of Jardine Motors Group in the U.K. Lithia also plans to enter the vehicle fleet management and DMS software markets, which are key components of its long-term strategy.
The Role of Pinewood DMS
Pinewood DMS is the centerpiece of the Pendragon deal and holds great potential for Lithia in the long term. The plan is to eventually bring the DMS to the U.S. and Canada, not only for Lithia stores but also for other partners in the automotive industry. Lithia’s CEO estimates that it will take two to three years to introduce Pinewood DMS to the North American market and three to five years to reach a significant scale. Lithia currently has a partnership with CDK Global, its current DMS provider in the U.S., and plans to collaborate with them if the transition to Pinewood DMS occurs.
The Benefits of the Deal
Lithia expects to generate over $38 billion in annualized revenue once the Pendragon deal is completed. With Pinewood Technologies as a partner, Lithia gains access to a profitable software company with a cloud-based and tech-savvy DMS. This deal also solidifies Lithia’s presence in the U.K. market, with a combined Jardine-Pendragon platform representing a 3.6 percent new-vehicle market share. Lithia plans to divest some stores in the U.K. and continue its domestic acquisitions in the U.S.
