AUTO, PDG, VTU: Auto stocks to look at amid falling car sales

Highlights:

• Used car sales have declined as the global semiconductor shortage has led to delays in the delivery of new cars.
• Due to this delay, people are now preferring to holding on onto their vehicles for longer.

Things are quite challenging not just for those looking to buy a new car but also for used car buyers. The global semiconductor shortage has led to delayed delivery of new vehicles as manufacturers struggle to meet the demand. The dearth of chips has stressed the production lines, choking the supply of new vehicles. This, in turn, has led to a lack of used cars as people stick to their cars for longer.

The sales for used cars have witnessed a slowdown in the quarter to the end of June. At 1.76 million, the number of secondhand cars sold in the UK was 14% lower than the pre-pandemic levels. This number is 407,820 or 19% less than the highest witnessed last year, as consumers rushed to forecourts following the relaxations in COVID-19 restrictions.

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Notably, new car sales also sharply declined last month due to the lack of semiconductors. According to the Society of Motor Manufacturers and Traders (SMMT), July witnessed a 10% fall in new car sales amid supply chain disruptions. This was the fifth month in a row when the sales declined. The industry body also slashed its new car sales forecast for the whole year, citing the challenging first half of the year. 

In the wake of this information, Kalkine Media® explores some auto-related stocks that may get impacted.

Auto Trader Group Plc (LON: AUTO)

Auto Trader Group is a new and used car dealer and conducts about 10 million transactions each year. It is listed on the benchmark FTSE 100 index and boasts of a market cap of £6,066.53 million as of Wednesday. Its shares slipped 0.53% and were trading at GBX 640.80 as of 11:07 am GMT+1 on 10 August. Over the past one year, the share price has appreciated by a meagre 0.25%, while its YTD return was in the trailing by -13.32%. The earnings per share currently are at 0.26. 

Pendragon Plc (LON: PDG)

Pendragon operates in the automotive retail sector and sells new and used cars, bikes, trucks, vans, etc. It also provides aftersales as well as body repair services. PDG holds a market cap of £329.68 million, and over the past one year, it has given a return of over 32% to the investors. The earnings per share are at -0.02. The stock traded at GBX 23.20, down 1.70%, as of 11:15 am GMT+1 on Wednesday.

Vertu Motors Plc (LON: VTU)

Vertu Motors is another British car dealership listed on the FTSE AIM All-Share. As of Thursday, it holds a market cap of £192.62 million with earnings per share of 0.04. Investors have received a return of 17.41% over the past year from the stock, but the YTD return stands in the negative territory at -21.45%. Shares of Vertu Motors were down 2.90% at GBX 53.60 as of 11:21 am GMT+1 on 10 August.

Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.