“We believe that local consumers generally don’t travel beyond the Newcastle/Hunter Valley region to buy new cars,” she said, “and it is difficult to find out the final price for a car without visiting a dealership.”

The regulator said it would now seek feedback from the market about whether forced asset sales would address competition concerns in the region.

But in a positive sign for the proposed takeover deal, the ACCC on Monday said its preliminary view was that it was unlikely to substantially lessen competition for the supply of new cars in Melbourne, Sydney, Brisbane or nationally, as well as the “wholesaling and retailing of used cars, the acquisition of car dealerships or the supply and acquisition of finance and insurance products”.

Responding to the concerns on Monday, AP Eagers said it would review the regulator’s preliminary views, but believed the merger would “not substantially lessen competition in any market”.

“Even in the few geographic areas where the activities of the two groups overlap, including Newcastle and the Hunter Valley, it is AP Eagers’ view that there will continue to be choice and competition,” the company said.

AP Eagers said it had engaged with its stakeholders, including global car manufacturers, about the proposed deal. It beleived it was “well advanced” in addressing the issues identified by the ACCC.

AP Eagers, which is AHG’s largest shareholder with a 28.8 per cent stake, in April launched the all-scrip takeover offer for the remaining shares. If approved, the combined company would command 12 per cent of the entire new vehicle sales market in Australia.

Car dealerships in Australia have been under pressure over the past year amid declining new vehicle sales, which auto industry executives believe is due to the tightening of bank lending controls following the banking royal commission and the effect of the slowing property market on consumer sentiment.

In 2018, sales of new cars across the country declined for the first time in four years, according to data released by the Federal Chamber of Automotive Industries, which showed 1,153,111 vehicles were sold in 2018 compared to a record year of 1,189,116 sales the previous year.

The ACCC said it would make a final decision by July 26 unless AP Eagers agreed to an extension.