Poor UK registrations hit dealership group profits

13 February 2018

Another aspect of the UK car market’s new registrations decline has come to light, as the country’s biggest dealership group posts a hit to its profits.

During 2017, the UK new car market fell by 5.7% as drivers decided to stay away from purchasing vehicles. This drop was brought about by a contraction of 17.1% in the diesel market. With concerns over the Brexit process and higher taxes levied on diesels to encourage drivers to switch away from the technology, many decided instead to dip into the used car market or stay away completely.

However, while the drop in the market has hit manufacturers, especially UK market leader Ford, it is also affecting dealership groups in the country. Pendragon, the UK’s largest network, has reported its annual profits fell by a fifth in 2017, taking just £60.4 million (€68 million).

Revenues rose 3.1% to £4.2 billion (€4.7 billion), but its operating margin slipped from 1.6% to 1.2%. The results were in line with lowered expectations after a profit warning late last year.

In a sign that drivers are instead flocking to the second-hand market, revenues from used cars rose 15.2% to £2.1 billion (€2.4 billion), while new vehicle revenues fell by 8.9% to £1.8 billion (€2 billion). The UK’s national used car market, at 7.78 million vehicles a year, is larger and more stable than the new market, the company believes.

Pendragon also expects new car sales to fall 6.6% this year across the UK, a higher decline than the official forecasts of industry body SMMT, which is expecting a 5.6% dip. Pendragon is also in the process of selling its US dealership business, which consists of Aston Martin, Jaguar Land Rover and a Chevrolet business in California. During the year, it settled an ′employment-related class action at a cost of £1.3m (€1.5 million) at the division, without giving further details.

The company now aims to focus on strengthening domestic operations in the second-hand market by investing in new technology.

′The used-car market is over three times bigger than the new-car market,’ CEO Trevor Finn told Reuters.

′We’re going for a 10% share of the market in 0-6-year-old cars. We know the number of vehicles … is increasing in that space so we know the market for us is going to grow for the next two or three years.’