Vertu Motors predicted that long waiting times for new cars would “cushion” the industry from an economic slowdown in the short term, as the dealership group raised profit expectations for the year because of higher prices.
The UK’s fourth-largest car dealer by sales said profits would be ahead of expectations after a “very patchy” supply of new cars kept prices for first and second-hand models artificially high.
A worldwide shortage of semiconductors has forced global car manufacturers from Toyota to Volkswagen to curtail production, leading to waiting times of up to a year for some models.
Although shortages began during the height of the pandemic, the industry is still facing stoppages and production halts after two years.
The trend has pushed up the price both of new models and second-hand cars, as more consumers switched to used vehicles.
“We haven’t seen a significant improvement in new car supply,” said Vertu’s chief executive Robert Forrester. “It was volatile, and very patchy.”
Margins on new cars remained higher than usual, he added, while the shortages meant that “used-vehicle prices are a lot more robust and resilient than they used to be”.
As well as driving up prices, the shortages and long waiting lists are expected to cushion carmakers and dealerships from an expected slowdown in consumer demand caused by economic headwinds and rising interest rates.
Rising rates are a “potential concern from an affordability standpoint”, Forrester said, adding that long waiting lists would “cushion” the industry from the impact.
Vertu’s pre-tax profits for the six months to July were £26.9mn, 40 per cent lower than in the same period a year earlier, when the squeeze on new models was even more acute. Sales in the six months rose 4 per cent to £2bn.
The company announced a £3mn share buyback on Wednesday. Its shares were up 6 per cent in early afternoon trading.
Forrester warned that higher costs — particularly wages — were likely to affect the group in the months ahead.
The company has set aside about £100mn for acquisitions, and said it had a “pipeline” of deals lined up. The sector, which has always been fragmented, is seeing a wave of consolidation, with larger rival Lookers now part-owned by Constellation, which took listed group Marshall Motors private last year.
Vertu’s smaller rival Pendragon is facing a takeover bid from Hedin, a European car dealer group where Vertu’s former boss Trevor Finn is a director.
Source: Financial Times
