Car dealership Vertu Motors has lifted its profit outlook after increasing prices amid mounting supply chain problems, but warned that the shortages are set to last until at least next summer.
Chief executive Robert Forrester said prices for used cars have rocketed by around 20.4% over the past six months as demand has jumped due to supply issues with new cars, caused by a global microchip shortage and freight troubles.
The group has been able to take advantage of supply chain problems and raise prices.
It said drivers are happy to pay more after saving money during lockdowns, and with more workers looking to drive to offices rather than take public transport.
In the six months to August 31, pre-tax profits hit a record £51.1 million compared with just £3.9 million a year ago at the height of the pandemic. Revenues rose 71.9% to £1.9 billion.
The group’s shares lifted 4% as it said full-year profits are likely to be more than £65 million – above market expectations of between £50 million and £55 million.
But Mr Forrester told the PA news agency that new car supply issues are not set to ease until the middle of next year.
He added that the group is investing an extra £12 million a year to attract and retain staff as it battles to fill vacancies in the UK-wide recruitment crisis.
The firm has around 500 unfilled vacancies – a historically high level for the group – with a particular shortage of skilled technicians.
It has moved to increase pay and boost staff reward packages as it looks to attract workers and become more competitive.
Mr Forrester said: “We’ve seen it become far more difficult to attract and retain people.”
He added that while it has chosen to invest in staffing, “there’s a cost of not having people”.
“We’ve got to maintain the customer experience.”
Vertu is also hiring around 50 staff for a new online “concierge” service to help customers with online purchases.
Its interim figures showed growth was particularly strong in the used car market, with sales up 67.3%. By comparison, new vehicles were up 44.8%.
Vertu said: “The used vehicle market in the UK has experienced unprecedented market dynamics, resulting in record vehicle pricing levels.
“The reduced new and used vehicle market in lockdown, together with new vehicle production disruption due to Covid-19 and parts supply disruption (particularly semi-conductor shortages), has caused used vehicles to be in increasingly short supply.
“This tightness in supply has coincided with a period of strong customer demand for used vehicles.
“The reasons for this include increased savings levels by consumers during lockdown and the absence of alternative spending options (such as holidays), and also consumers wishing to avoid public transport.”
New cars have struggled to roll off production lines due to the chip shortages, but Vertu said customers are “increasingly accepting of long lead times”.
Its commercial fleet business also saw strong growth, with particularly high demand for vans.
The firm said this was due to “lockdown savers” spending their cash on home improvements, leading to a rise in demand for tradespeople buying vans.
The company added: “In addition, the growth in online retail purchases has fuelled demand from delivery drivers. This demand has come at a time of limited supply, driving up prices and margins.”
There was also strong demand for aftersales services, adding to the increase in profits.