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Car dealership profits up by sevenfold following post-Covid surge in demand

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Despite reporting the fourth consecutive month of growth, the UK automotive recovery is threatened by increasing costs.
Despite reporting the fourth consecutive month of growth, the UK automotive recovery is threatened by increasing costs.

Profits at the UK car dealerships rose by more than a sevenfold in 2021 following a post-Covid surge in demand.

According to data from accountancy group UHY Hacker Young, profits went up 627 per cent, from £105m in 2019/2020 to £764m a year later.

Following the end of lockdown, new car sales went up as 141,583 new vehicles were sold in April 2021, 32 per cent up on 2020 levels.

Car dealerships, UHY Hacker Young reported, also profited by a hike in the price of used car, as automotive output slumped because of Covid-induced supply chain issues and raw material shortages.

“The rise in profits has been much needed after the damage the pandemic did to the industry,” said UHY’s automotive partner Ian McMahon.

“Some dealership groups wouldn’t have survived without government assistance in 2020 but in 2021 they had a boom year of sales and rising used stock values.”

Looking ahead, car dealerships are expected to suffer a few bumps as automotive output continues to spiral downward because of global pressures.

Data from the Society of Motor Manufacturers and Traders (SMMT) reported that the UK production fell by 11.3 per cent in April, with only 60,554 new vehicles produced, City PM reported.

Falling car output is expected to impact also the used car market, denting dealerships’ profits.

“The lack of new cars will impact the amount of used cars that are available for retail,” said Edison’s Group’s director of research Neil Shah while commenting on AutoTrader’s results.