Greater choice in terms of new electric vehicles (EV) entering the marketplace is forcing carmakers to cut prices and offer cheaper finance, according to industry heavyweight Vertu Motors.
In its latest trading update ahead of half-year results, the car retailer said the recent influx of EV models looked to be exceeding the UK car buying public’s actual appetite for electric options.
“Recent increased supply of new electric vehicles appears to be exceeding retail demand,” it said, “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 retailer which operates a network of 189 sales and aftersales outlets said demand from the fleet sector for electric vehicles remains robust and was proving ‘critical to the electrification of the vehicle parc’.
Used car volumes declined 6.3% in the five months ended 31 July compared to the same time last year while rising interest rates meant that Vertu was this year unable to run its popular 0% finance offers on used vehicles.
Vertu noted that the continued lack of supply of used cars had been flagged widely in the industry with Autotrader reckoning that there are currently 27% fewer sub-5-year-old-cars in the UK parc compared to 2019.
“These supply trends have helped drive stability in used vehicle prices, except for used electric vehicles which have been impacted by substantial increases in supply into the used market,” it said.
Despite the challenge presented by the supply pipeline, Vertu said it had boosted inventory levels to secure future sales volumes. “This has been possible due to the strong procurement capabilities of the group in the used car area, including the close partnership with its manufacturer partners and the benefits that come from part exchanges derived from increasing new car sales,” it said.
Vertu said it remained optimistic about trading prospects pointing to the increasing supply of new vehicles and that a constrained used vehicle supply was at least helping to underpin values.
“The roll out of agency distribution models is at an early stage and the group will continue to monitor the impact on the business and financial returns,” it added. “Whilst used vehicle purchases remain essential for many, the market outlook remains unclear due to the impact of inflationary pressures and higher interest rates for consumers.”
Aftersales demand remains strong with its profitable vehicle repair and service operations driving revenue growth in both service and parts despite ongoing issues with technician resource levels. “Consequently," it said, "the group has taken further pay action in July to promote the recruitment and retention of technicians and this should aid further growth.”
The group said it was delivering trading profits above previous years, aided by the Helston acquisition which was completed in December 2022 with the business expecting full year results for 2024 in line with current market expectations.
Robert Forrester, chief executive of Vertu Motors, said: “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."