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MAJOR Australian automobile retailer AP Eagers Ltd has announced an expected downgrade to its earnings for 2018 to echo a similar path forecast by its main rival, Automotive Holdings Group (AHG) Ltd.

CEO Martin Ward said “our core business has taken a hit but it is very strong”, while adding that 2018 is a year of transition because of “regulatory disruption”.

AP Eagers made no financial predictions for the year, although Mr Ward said “we expect to be marginally ahead of last year”.

At its annual general meeting yesterday, chairman Tim Crommelin said AP Eagers had increased its shareholding in AHG to 24.9 per cent and that it plans a “quality acquisition” of a dealership in the second half of this year.

Of interest was his comments on electric vehicles, car sharing, the subscription models and alternative retail models.

He said electric vehicles represent only one per cent of global and Australian sales and “over the next five years this will change very little” because products are not available.

“The impact on the economic model of AP Eagers and the industry due to electric vehicles will slowly occur from 2023 onwards and we are the best-placed group within Australia to manage this change,” Mr Ward said.

“Extensive planning is already occurring even though physical dealership infrastructure changes are not required for approximately eight years.”

On car sharing, he said: “Over the past 12 months, management and some directors have visited the start-up founders and CEOs of the globally-recognised leaders in each of these sectors.

“We are not only comfortable that we understand these sectors, we could become a major or leading player within Australia in some or all of them,” he said.

“However, we will need to invest and determine which – if any – will deliver long-term sustainable returns.”

On ride sharing, Mr Ward said his company would not compete as operators “but will continue to supply cars to taxi and ride-sharing companies”.

“We are also working on new business models that we have observed overseas to supply more cars to the sector in an innovative and commercially-sustainable manner.

“In summary, we have a good grasp of the start-ups and opportunities that changing consumer needs are presenting.”

Unlike AHG, AP Eagers shares barely moved, opening yesterday at $8.68 before the news and then hovering around $8.60. The company’s majority shareholder, Nick Politis through his WFM Motors and NGP Investments vehicles, bought more than 90,000 shares between Friday and yesterday for a total of $418,825.49.

By Neil Dowling

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