8:07 am, August 30, 2023
Car manufacturers are slashing prices of EVs due to an ‘imbalance’ between supply and demand.
That’s according to one of the largest listed dealer groups in the UK – Vertu Motors.
The business – which currently has 189 sales and aftersales outlets across the country, and has sites that operate under the Vertu, Bristol Street Motors, Macklin Motors and Carrs names – said it has grown sales of new cars across the board in the past six months, thanks to improved supply.
But for electric vehicles, better supply levels weren’t being matched by consumer demand.
In a trading update for the six-month period ended August 31, 2023, Vertu Motors said: ‘In the new retail and Motability channel, like-for-like volume growth has been delivered, as supply constraints continue to ease. Supply is improving overall which aids sales volumes.
‘Recent increased supply of new electric vehicles appears to be exceeding retail demand, creating an imbalance in pipeline inventory coming into the key plate change month of September.
‘Manufacturers are reacting to this through the offer of discounted prices and supported finance rates to stimulate retail demand.’
The statement added: ‘Fleet sector demand for electric vehicles remains robust and is currently critical to the electrification of the vehicle parc.’
The trading update, issued on the London Stock Exchange this morning (Aug 30), said trading for the past six months was ‘positive’ and ‘in line with expectations for the full year’.
Trading profit is ‘above prior year levels’, aided by its acquisition of Helston Garages in December 2022; the precise figure will be revealed later when half-year results are published.
While sales of new vehicles have grown for the car dealer group, sales of used vehicles have fallen by 6.3 per cent.
Rising interest rates have prevented the company from running its zero per cent finance offers so far this year.
That, coupled with a shortage of sub-five-year-old used cars, led to the decline in sales.
Gross profits per unit on second-hand cars remain ‘above historic levels’, and the car dealer group has increased its mix of stocking older vehicles.
Despite fewer sub-five-year-old cars in the used car parc, Vertu said it has increased its inventory levels ‘to ensure future sales volumes are maximised’ thanks to the ‘close partnership’ it has with its manufacturer partners.
The numbers of technicians in the industry remains a problem, said the trading update, and is a ‘constraining factor’ in meeting both retail demand for work and in the preparation of used vehicles.
Vertu is reacting by taking ‘pay action in July to promote the recruitment and retention of technicians and this should aid further growth’.
Gross profit in aftersales, meanwhile, also rose in the six-month period.
Driving efficiencies through the business remains a key focus for Vertu, the update said, with 26 of its sites now having solar panels installed.
Vertu Motors CEO Robert Forrester said: ‘I am pleased to report that trading remains positive.
‘The entire Vertu team has put in hard work and dedication once again, and I would like to thank them all.
‘Used car pricing has remained firm and we have gained market share in the new car market.
‘The performance of our high margin aftersales business has remained strong.’
He added: ‘The integration of Helston Garages remains on track to deliver the planned synergies.
‘The board remains optimistic for the future, we anticipate that full-year results will be in line with current market expectations, and we are excited about the opportunities our enlarged portfolio will create for Vertu Motors.’
In its outlook statement, Vertu said it continues to keep a close eye on the roll-out of agency sales and ‘monitor the impact on the business and financial returns’.
Analysts Zeus Capital responded positively to the trading update, saying that it increased its confidence in its full-year estimates for Vertu.
Zeus’s forecasts remain unchanged, however. It updated its FY24 profit before tax forecast by 8.6 per cent on March 2, and a further 2.1 per cent to £48.0m on May 10.
Zeus said: ‘In FY25, we forecast 4.1 per cent revenue growth to £4.9bn and 7.1 per cent underlying PBT growth to £51.0m as further Helston synergies are realised and the group continues to benefit from greater efficiencies due to scale and its technology investment.’
It added that it continues to believe Vertu shares are undervalued.
