Dealers gear up for the internet

Two of the UK's largest motor dealers are to shake up the way we buy cars with radical internet initiatives.

Pendragon, the UK's biggest car dealer, is preparing to sell off most of its dealerships and concentrate on selling cars online. Meanwhile, DC Cook, the Yorkshire-based group, is to launch an online service, finance and buying site and will decide this week whether to back a venture to source new cars from Europe.

Earlier this month, Pendragon announced the £78.6m acquisition of Lex, its smaller rival, which brought its empire of showrooms to 196. However, the company is expected to dispose of up to three-quarters of its entire portfolio of dealerships to concentrate its marketing on the website which it hopes to have up-and-running in the next few weeks.

Sir Nigel Rudd, the chairman of Pendragon, is understood to be determined to correct the company's plummeting share price, which has fallen from a peak of 398p in 1996 to close at 101.5p on Friday. He has turned his attention to the car dealer after masterminding the transformation of another company he chairs, Williams, which last week announced a plan to split itself in two.

The sale of most of Pendragon's portfolio is designed to unlock the value which its management believes to have been ignored by the stock market. One City analyst estimated that Pendragon's assets are worth £200m, compared to its £60m market capitalisation. As more car buyers use the web to choose their vehicle, Pendragon has concluded that it will need fewer dealerships to service its customers.

Insiders believe the acquisition gives Pendragon the geographical spread to provide a thin network of dealerships to support its online customers.

Almost as radical are plans being put in place by Derek Cook, the founder and chairman of DC Cook. The company will unveil its internet strategy in the next few weeks which will see it close up to a third of its dealerships and launch two new internet portals.

These will allow buyers to work out the running costs of cars before purchase, to order test drives over the net and to book for their car to be serviced at any DC Cook outlet in the UK.

The company is also in talks with Totalise, the car importer, about launching a joint venture to source cheaper new cars from abroad. Mr Cook will decide this week whether to go ahead with the project, which would be a radical step for a UK car dealer as most are scared of angering the manufacturers.