Published On: Fri, Jan 30th, 2015

Soros Planning $1 Billion Investment in Auto Dealerships

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George Soros, chairman of Soros Fund Management, is interested in investing in auto dealerships, reports said.

Soros Fund Management sent representatives to the National Automobile Dealers Association convention in San Francisco where they spoke about its plan. The fund already completed its research about the auto industry, ValueWalk said.

Soros is ready to jump into the auto dealership business if the right opportunity comes up. The billionaire investor intends to invest as much as $1 billion on dealerships, according a source quoted by Automotive news, the report said.

According to the report, Vipul Tandon, one of the representatives of Soros, explained to auto dealers that Soros Fund has a different approach than regular hedge funds and private equity funds. He emphasized that the fund is a family fund, which invests the private assets of Soros, ValueWalk said.

“Soros see themselves as intelligent capital. You’ll run the dealership, day-to-day, but they’ll help you with capital strategies. For example, they may be able to help you with non-core business decisions such as HR. They want current management to stay in place because they don’t know how to run car dealerships, ” a source said, according to the report.

One of the sources said Soros is interested in high-quality growth and expansion, and to become part of a bigger and better dealership group, the report said.

Since dealerships are franchises granted by automakers, they represent a type of cartel, well protected by state laws. Auto dealers cooperate to limit competition, though dealers often quibble about whether the automakers allocate their territories fairly, Fortune said.

Although profit margins on vehicles have been getting slimmer due to increasing price transparency made possible by the Internet, cash flow remains prodigious from consumer purchases of used and new vehicles, maintenance, insurance and financing, according to Fortune.

Market observers suggested that Soros could potentially race Warren Buffett if decided to acquire a group of auto dealerships. Last year, Buffett’s Berkshire Hathaway Inc. purchased Van Tuyl Group, the fifth largest auto dealership group in the United States, ValueWalk said.

At the time, Buffett hinted that his company intends to make more acquisitions in the future given his statement, “This is just the beginning for Berkshire Hathaway Automotive”, he said, according to the report.

 

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