Vertu Motors has issued a warning regarding the pressures facing the new car market as manufacturers strive to meet government-imposed zero-emission targets, resulting in significant price reductions.
The car dealership group noted that while demand for battery electric vehicles (BEVs) remains subdued, supply is increasing, leading to widespread price cuts.
For the six months ending August, Vertu reported revenues of £2.5 billion, reflecting a 3% increase compared to the previous year, largely driven by sales in the used car and aftersales segments. However, the volume of new car sales declined by approximately 6%, though this drop was less severe than the broader UK market, which experienced an 11.2% decrease in new car sales during the same period.
The company highlighted that the market is experiencing volatility due to the UK’s environmental targets, compelling manufacturers to ramp up BEV production. Under the government’s zero-emission vehicle mandate, 22% of all new car sales must be BEVs by 2024, increasing to 80% by 2030 and reaching 100% by 2035.
Vertu expressed concern that the new car and van markets may continue to face pressure unless current regulations are modified. They emphasized that manufacturers cannot sustain price cuts indefinitely, suggesting that government incentives, such as tax breaks or subsidies, may be necessary to stimulate private BEV sales. They also noted that changes to the mandate could alleviate pressure on the sector and facilitate a smoother transition to electric vehicles.
Despite these challenges, Vertu reported a decrease in adjusted pre-tax profit to £23.5 million for the half-year, down from £31.5 million the previous year. This decline is attributed to rising costs driven by inflation and workforce expansion. Nonetheless, the firm anticipates improved profitability in the latter half of the year, buoyed by a stronger used car market.
CEO Robert Forrester remarked, “I am pleased with the group’s first half performance against a fast-shifting market backdrop. The retail new car market declined as the government’s regulation to transition to battery electric vehicles introduced market volatility and negative effects in terms of affordability.”
