Pendragon delivers profit cheer, but cautions over new car supply shortages

New car delivery times are being hit by delays due to the impact of a global shortage of microchips used in vehicle electronics.

Pendragon (PA Wire)

Car dealership Pendragon has said it expects to swing to a half-year profit thanks to a surge in demand in May and June, but became the latest to warn over a shortage of new vehicles.

The group said it now expects to post underlying pre-tax profits of around £30 million for the first six months of 2021, against underlying losses of £31 million a year earlier.

This is set to see it deliver annual profits in the range of around £45 million to £50 million, up from £8.2 million in 2020, it added.

Whilst the extent of the impact of the well-publicised semi-conductor chip shortage is not yet clear, it is becoming increasingly apparent there is likely to be some restriction of supply during the second-half of 2021, with vehicle order times already being extended

Pendragon

It said trading had been “particularly strong” this month and last, with the used car market leading the way and pent-up demand after lockdowns boosting prices.

But it joined rivals in cautioning over the risk from new car supply woes, with order times already lengthening.

It comes after Vertu Motors last week raised concerns over the issue and said delivery times were being hit by delays.

Rival car dealership Inchcape also recently cautioned over the impact of a global shortage of microchips used in vehicle electronics.

Manufacturers pulled back on supplies and orders for microchips after sales fell in the early stages of the pandemic.

Car production has since ramped up again as demand starts to grow, but chip manufacturers have been unable to keep up, causing a global shortage.

Figures from the Society of Motor Manufacturers and Traders (SMMT) last week showed that so far this year UK factories have built 429,826 cars, up 105,063 on 2020, but overall output remains down by 22.9% on the same five-month period in 2019.

Pendragon said: “There remains continued uncertainty as we move in to the second-half of 2020-21 with potential further disruption from Covid-19, an expected realignment of used vehicle margins and the risk of both new and used vehicle supply constraints.

“Whilst the extent of the impact of the well-publicised semi-conductor chip shortage is not yet clear, it is becoming increasingly apparent there is likely to be some restriction of supply during the second-half of 2021, with vehicle order times already being extended.”