Profits for the UK’s top 20 car dealership groups have increased more than sevenfold over the past year, from £105m in 2019/20 to £764m in 2020/21.
That’s according to new research from national accounting group UHY Hacker Young.
Auto dealership groups had a very strong 12 months, rebounding from a difficult period at the start of the pandemic. The lockdown forced car dealerships to close completely for several months, drastically reducing sales to a record high of just 4,321 new vehicles in April 2020.
Since the end of the lockdown, new car sales have rebounded strongly as demand rebounded from Covid. 141,583 new cars were sold in April 2021, more than 32 times more than in the previous April.
Dealership revenues were also boosted by rising used car values as supply chain issues reduced the availability of new cars. In 2021, some dealerships have voluntarily stockpiled some of their used inventory, rather than selling immediately in order to benefit from rising used car prices. This had never been seen before in an industry that focuses heavily on rapid inventory turnover.
Consumers are increasingly buying more expensive electric vehicles to replace their gasoline or diesel vehicles, presenting an opportunity for car dealerships to increase their profits.
Ian McMahon, Automotive Partner at UHY Manchester, said: “The past year has been fantastic for automotive dealership groups. The rise in profits was much needed after the damage the pandemic has wreaked on the industry.
“Some dealer groups would not have survived without government assistance in 2020, but in 2021 they had a boom year in sales and an increase in the value of second-hand inventory. The contrast couldn’t be starker.
“After such a successful year, dealers will likely look to the coming months with a wary eye. With consumer spending under severe pressure due to the cost of living crisis, this year will likely be more challenging than the last. .