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Mercedes-Benz added to AHG ranks

AHG has purchased a Perth Mercedes-Benz franchise for $58 million.

Automotive Holdings has added an up-market touch with the $58 million purchase of the Mercedes-Benz franchise.

The country's biggest car dealer group, Automotive Holdings, has added an up-market touch to its presence in hometown Perth with the $58 million purchase of the Mercedes-Benz franchise from local bizoid Ian Goldie.

Not that the Merc marque quite has the cachet it used to. Entry-level models these days start at $50,000 — not much more than a high spec Conformodore — and industry stats show the Benzes outselling names such as Honda, Kia, Ford and Mitsubishi.

So relative to AHG's Porsche and Bentley franchises, AHG is picking up more of a masstige (mass prestige) business than a truly luxury one.

AHG chief Bronte Howson adds that however you want to describe it, the luxury sector is "driving" the growth in the overall market, which had a bumper June.

The purchase, AHG's biggest since paying $68m for 13 Newcastle dealerships in August last year, came after industry figures showed the new car market zoomed up 6.4 per cent in June.

But Howson believes one vaunted reason for the strength — the immediate $20,000 deduction for business-related equipment — has been overplayed. "Any assistance or stimulus is good, but we didn't hear a lot of people saying ‘this is great'," he said.

The more likely reasons for the strength include manufacturer promotion activity and record high car affordability.

The conditions point to an ongoing purple patch for AHG and the Brisbane-based Eagers.

With a WA bias, AHG had suffered from the mining downturn, but these headwinds appear to have abated.

Across the continent, Eagers has benefited from storm-related replacement activity.

AHG doesn't do trading updates, so we will assume the consensus guidance of $90m net profit remains intact.

At its May AGM, Eagers reiterated expectations of an underlying first (June)-half profit of $54m-$58m, a 17-26 per cent increase.