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Car crunch: Vertu Motors warns part shortages leading to fight for new vehicles

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Photo: Vertu
The global chip shortage has put pressure on a number of carmakers. Photo: Vertu

UK car dealership group Vertu Motors (VTU.L) is worried about disruption to its business due to a shortage of parts amid the pandemic, but it has upped its profit forecast as the prices of used vehicles increase.

The firm said “a tightening of new vehicle supply, largely reflecting component shortage … is increasingly apparent” and means customers have to wait longer for their car to be delivered.

And while there are "risks in relation to the remainder of the financial year concerning potential COVID-19 disruption and vehicle supply constraints", the price of used cars has gone up because of limited supply and soaring demand.

"The reduction in new car supply is contributing to a reduced supply of used vehicles, with a resultant exceptional wholesale pricing environment," it said.

Due to this, the company hopes full-year adjusted profit before tax will be above current expectations, in the range of £28m ($39m) to £32m.

Shares in the company rose 5% on Wednesday late afternoon.

Vertu Motors stock was up on Wednesday. Chart: Yahoo Finance UK
Vertu Motors stock was up on Wednesday. Chart: Yahoo Finance UK

“With its strong asset base, scale, manufacturer relationships, well-invested systems including the Click2Drive sales technology platform and experienced leadership team, the board believes that the group is strategically very well-placed to capitalise on the changes and opportunities in the UK motor retail sector,” the company said in a statement.

Read more: The chip shortage bringing car factories to a standstill

Earlier this month the FT reported that "used car prices have been steadily rising, caused by a supply and demand imbalance because of the coronavirus crisis and chip shortage".

The global chip shortage has put pressure on a number of carmakers who are competing directly with tech companies and the consumer electronics sector for supply.

The semiconductor industry that makes these chips has failed to keep up with rising demand after it bounced back faster than expected during the coronavirus pandemic.

Watch: UK property: What is shared ownership?

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